COMMISSION STAFF WORKING DOCUMENT EVALUATION of Decision No 1025/2013/EU of the European Parliament and of the Council of 22 October 2013 providing macro-financial assistance to the Kyrgyz Republic
Date: 2019-12-17
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EU aid, EU loan, Kyrgyzstan, economic reform, economic stabilisation, financial aid, macro-financial assistance

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 17.12.2019  SWD(2019) 446 final  COMMISSION STAFF WORKING DOCUMENT  EVALUATION of Decision No 1025/2013/EU of the European Parliament and of the Council of 22 October 2013 providing macro-financial assistance to the Kyrgyz Republic  {SWD(2019) 448 final}  
 
 
Contents 

Glossary ............................................................................................................................................... 2 

1. 

Introduction ..................................................................................................................................... 5 

Purpose ................................................................................................................................................ 5 

Scope ................................................................................................................................................... 5 

2.  Background to the intervention ....................................................................................................... 7 

Description of the intervention and its objectives ............................................................................... 7 

3. 

Implementation / State of Play ...................................................................................................... 11 

3.1. Modality and implementation of the MFA programme ............................................................. 11 

3.2. Economic developments during the lifecycle of MFA (Q4 2011- Q2 2016)  ............................ 14 

3.3. Economic developments after the implementation of MFA ...................................................... 19 

3.4 Continued support from the EU after the implementation of MFA ............................................ 19 

4.  Method .......................................................................................................................................... 20 

Documentary review ..................................................................................................................... 21 

Macroeconomic data analysis (including Debt Sustainability Analysis) ...................................... 21 

Interviews with key informants/ stakeholders ............................................................................... 21 

Focus Group with development partners ....................................................................................... 21 

Qualitative counterfactual analysis................................................................................................ 21 

Social Impact Analysis (SIA) ........................................................................................................ 21 

Limitations and Methodological Issues ......................................................................................... 22 

5.  Analysis and answers to the evaluation questions ......................................................................... 23 

5.1 

5.2 

5.3 

5.4 

5.5 

5.6 

5.7 

Relevance .............................................................................................................................. 23 

Effectiveness of MFA ........................................................................................................... 24 

Efficiency .............................................................................................................................. 27 

EU Value Added ................................................................................................................... 28 

Coherence .............................................................................................................................. 29 

Social Impact Analysis .......................................................................................................... 30 

Debt Sustainability Analysis ................................................................................................. 31 

6.  Conclusions ................................................................................................................................... 32 

Annex 1: Procedural information .......................................................................................................... 35 

Annex 2: References ............................................................................................................................. 37 

Annex 3: Discussion of validity and reliability of the evaluation findings ........................................... 41 

Annex 4: Comparison of MFA, IMF and World Bank conditionalities ................................................ 42 

Annex 5: Evaluation Framework .......................................................................................................... 44 

Annex 6: Synopsis Report ..................................................................................................................... 51 

Annex 7: Summary of findings from stakeholder consultation activities ............................................. 55 

1 

 
 
 
Glossary 

ADB 

Asian Development Bank 

CPI 

CU 

DCI 

Consumer price index 

Customs Union 

Development Cooperation Instrument 

DFID   

Department for International Development (UK) 

DG DEVCO  Directorate-General for International Cooperation and Development 

DG ECFIN  Directorate-General for Economic and Financial Affairs 

DG ECHO  Directorate General for European Civil Protection and Humanitarian Aid 
Operations  

DIPECHO  Disaster-Preparedness ECHO  

DPO 

DSA 

Development Policy Operations  

Debt Sustainability Analysis 

EACU  

Eurasian Customs Union  

EAEU  

Eurasian Economic Union 

EBRD  

European Bank for Reconstruction and Development 

ECF 

EDB 

Extended Credit Facility  

Eurasian Development Bank  

EEAS   

European External Action Service 

EEU 

EIB 

Eurasian Economic Union 

European Investment Bank 

EIDHR 

European Initiative for Democracy and Human Rights  

EIU 

EU 

EUR 

Economist Intelligence Unit 

European Union 

Euro 

EURASEC  Eurasian Economic Community 

FATF   

Financial Action Task Force  

FDI 

Foreign direct investment  

FMIS   

Financial Management Information System 

2 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GDP 

GIZ 

Gross Domestic Product 

Deutsche Gesellschaft für Internationale Zusammenarbeit  

GSP+   

Generalised Scheme of Preferences 

GTAC  

Governance Technical Assistance Credit 

IBC 

IcSP 

IDA 

IDB 

International Business Council 

Instrument contributing to Stability and Peace  

International Development Association 

Islamic Development Bank  

IFCA   

Investment Facility for Central Asia  

IMF 

International Monetary Fund 

INTOSAI 

International Organization of Supreme Audit Institutions 

KGS 

KZT 

Kyrgyz national currency (Som) 

Kazakhstani tenge 

LGBTI  

Lesbian, gay, bisexual, transgender, and intersex  

MDBF  

Medium Term Budget Framework  

MDTF  

Multi-Donor Trust Fund  

MFA 

Macro Financial Assistance 

MTDS  

Medium Term Development Strategy  

NBKR  

National Bank of the Kyrgyz Republic 

NSI 

Nuclear Safety Instrument  

NSSD   

National Strategy for Sustainable Development 

OA 

Operational Assessment 

OSCE   

Organization for Security and Cooperation in Europe 

PCA 

Partnership and Cooperation Agreement 

PEFA   

Public Expenditure and Financial Accountability 

PFM 

PIP 

RCF 

RIP 

Public Finance Management 

Public Investment Programme 

Rapid Credit Facility 

Regional Indicative Programme 

3 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RUR 

Russian national currency (Ruble) 

SDPK   

Social Democratic Party of Kyrgyzstan 

SDR 

Special Drawing Rights 

SECO   

State Secretariat for Economic Affairs 

SIA 

Social Impact Analysis 

SIDA   

Swedish International Development Cooperation Agency 

SRC 

TAF 

US 

Sector Reform Contracts 

Technical Assistance Facility  

United States 

USAID 

United States Agency for International Development 

USD 

VAT 

WB 

United States Dollars 

Value Added Tax 

World Bank 

WTO   

World Trade Organization 

4 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.  Introduction  

Purpose   

This  Staff  Working  Document  presents  an  assessment  of  the  Macro-Financial  Assistance 
(MFA)  operation  provided  by  the  European  Union  (EU)  to  the  Kyrgyz  Republic  over  the 
period  2015-2016.  It  largely  draws  on  an  independent,  ex-post  evaluation  conducted  by  an 
external  contractor  and  extensive  consultations  with  targeted  stakeholders  in  the  Kyrgyz 
Republic as well as Commission specialists on this field. The aim is to assess the results and 
efficiency of the completed MFA and to draw lessons for future decision-making and identify 
areas of improvement for similar on-going or future possible interventions.  

Scope 

Macro-financial  assistance,  or  MFA,  is  an  EU  financial  instrument  designed  to  address 
exceptional  external  financing  needs  of  countries  that  are  geographically,  economically  and 
politically  close  to  the  EU.  It  takes  the  form  of  medium/long-term  loans  or  grants,  or  a 
combination  of  these,  and  is  only  available  to  countries  benefiting  from  a  disbursing 
International  Monetary  Fund  (IMF)  programme.  The  assistance  is  released  in  instalments 
strictly dependent on the successful implementation of reform measures aimed at putting the 
beneficiary  country’s  economy  back  on  a  long-term  sustainable  path.  In  this  way,  MFA 
complements  regular  EU  cooperation  assistance  and  contributes  to  the  wider  goal  of 
preserving stability and promoting prosperity beyond the EU. 

In October 2013, the European Parliament and the Council approved a EUR 30 million MFA 
operation  to  the  Kyrgyz  Republic.  The  operation  was  disbursed  in  full,  in  two  instalments, 
over the period June 2015 and April 2016.   

In  accordance  with  the  Financial  Regulation  (article  30  point  4),  MFA  operations  in  third 
countries  are  subject  to  an  ex-post  evaluation.  In  turn,  the  MFA  Decision  on  Kyrgyzstan1 
stipulates  that  the  European  Commission  is  required  to  "[...]  submit  to  the  European 
Parliament  and  to  the  Council  an  ex-post  evaluation  report,  assessing  the  results  and 
efficiency of the completed Union’s macro-financial assistance and the extent to which it has 
contributed to the aims of the assistance." 

The  ex-post  evaluation  was  undertaken  by  an  external  contractor  and  ran  from  March  2018 
until April 2019. The ex-post evaluation assessed the implementation of the MFA programme 
to Kyrgyzstan that was initiated in 2011 and disbursed in full in 2015 and 2016. The external 
report has assisted in the preparation of the Staff Working Document (SWD). Because of the 
nature of the assistance, the SWD evaluation looks at both the immediate and medium-term 
impact  of  the  MFA  programme  on  the  country's  economy  and  state  of  play  with  structural 
reforms. 

The objectives of this ex-post evaluation are two-fold:  

 

 

to analyse the impact of the MFA on the economy of Kyrgyzstan, and in particular, on 
the sustainability of its external position; and  
to assess the added value of the European Union’s (EU) intervention. In general, the 
evaluation seeks to draw lessons with respect to the EU's financial assistance, i.e. 

1 Decision No 1025/2013/EU (OJ L 283, 25.10.2013, p. 1–6) 

5 

 
 
 
 
 
                                                 
o  whether  the  ex-ante  considerations,  determining  the  design  and  terms  of  the 
operation were appropriate, taking due account of the economic, political and 
institutional context; and  

o  and whether the outcome of the programme met the objectives. 

In turn, these main areas of analysis have been assessed conform the five Better Regulation 
evaluation criteria: relevance, effectiveness, efficiency, EU added-value, and coherence with 
other  EU  policies.  In  addition,  the evaluation  assesses the impact  of  the  MFA  on  the  social 
sector and the public debt sustainability in the Kyrgyz Republic. This is further specified in 
the Evaluation Roadmap2. 

2 Available at:  https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-6341347_en 

6 

 
 
 
 
                                                 
 
2.  Background to the intervention 

Description of the intervention and its objectives 

The  Kyrgyz  Republic  was  strongly  hit  by  the  global  economic  crisis  in  2008-2009.  Output 
growth  declined  from  a  buoyant  7.6%  in  2008  to  2.9%  and  -0.5%  in  2009  and  2010 
respectively.  This  was  largely  due  to  external  shocks,  including  a  fall  in  remittances  from 
migrant workers, lower demand for  exports and shrinking foreign investments3. In  addition, 
mounting  political  instability  further  plunged  Kyrgyzstan  into  an  economic  slowdown.  In 
April 2010, the regime of President Bakiyev was overthrown under allegations of corruption 
and lack of democracy. In a vacuum of power, inter-ethnic violence erupted in June 2010 in 
the South of the country, leaving over 450 people dead and hundreds of thousands displaced. 
In spite of these tragic events however, the new, interim government secured an approval vote 
for  democratic  reforms  in  a  constitutional  referendum  held  on  27  June  2010.  Subsequently, 
free  parliamentary  elections  were  held  in  October  2010  establishing  the  first  parliamentary 
democracy in Central Asia.  

The  2010  revolutions  became  known  as  the  Second  Kyrgyz  Revolution,  and  had  adverse 
effects  on  economic  activity,  confidence  within  the  private  sector,  the  government's  fiscal 
position, and other key economic indicators.4 Figures 1 to 4 overleaf illustrate. On the fiscal 
side, public debt to GDP ratio grew to 60% in 2010, while the fiscal deficit rose from 3.5% of 
GDP  in  2009  to  5.9%  of  GDP  in  2010,  reflecting  the  budgetary  cost  of  the  crisis-related 
measures  and  the  negative  effect  of  weaker  economic  activity  on  tax  revenues.  On  the 
external  side,  Kyrgyzstan’s  trade  balance  had  worsened  due  to  a  disruption  in  trade  flows, 
primarily  driven  by  border  closures  (notably  with  Kazakhstan),  and  an  alarming  security 
situation that markedly affected tourism and partly disrupted agricultural production. Indeed, 
the current account moved from a temporary surplus in 2009 to a deficit of 2.2% of GDP in 
2010. On the monetary side, the central bank of the Kyrgyz Republic had tightened monetary 
policy  substantially  since  the  mid-2010,  responding  to  an  acceleration  in  inflation  due  to  a 
sharp increase in the global prices of fuel and food.  

In response to these events and their economic implications, a donor conference “Emergency 
assistance to the Kyrgyz Republic: Reconciliation and Recovery” was organised in Bishkek in 
July 2010. At this conference, donors committed to providing USD 1.1 billion in emergency 
support by the end of 2011. The EU was among the major donors, pledging about EUR 118 
million for support in a number of critical areas, through various instruments including:  

  EUR  12  million  of  new  assistance:  EUR  5  million  in  humanitarian  emergency 

assistance and EUR 7 million from the stability instrument 

  EUR  106  from  existing  development  assistance,  including  EUR  55  million  of  EU 
development  assistance ready to  be launched  in  2010  with  a  focus  on  Special  safety 
nets,  Education  and  Agriculture;  and  EUR  51  million  for  the  2011-2013  period  to 
advance reform in the areas of Social protection, Education and Rule of Law. 

3 European Commission, 2011. Ex-ante evaluation statement on EU macro-financial assistance to the Kyrgyz 
Republic. Available at: https://eur-lex.europa.eu/legal 
content/EN/TXT/PDF/?uri=CELEX:52011SC1619&from=EN 
4 The ‘Joint Economic Assessment: Reconciliation, Recovery and Reconstruction (JEA)’ by the IMF, WB, ADB 
(and the participation of the European Commission) provides a detailed assessment of the impact of tumultuous 
events 
https://www.imf.org/en/Publications/Policy-
Papers/Issues/2016/12/31/Kyrgyz-Republic-Joint-Economic-Assessment-Report-for-the-Kyrgyz-Republic-
Donor-Conference-PP4466 

Available 

April 

June. 

and 

at: 

of 

7 

 
 
 
 
                                                 
Figure 1. 

 Public debt, in % of GDP, 2000 - 2010 

  Figure 2.  General government balance, in % of GDP, 2000 - 2010 

Figure 3. 

Inflation, 2000 - 2010 

  Figure 4.  Current account deficit, in % of GDP, 2000 - 2010 

Source: IMF and WB data 

8 

 
 
 
 
 
 
 
 
 
 
The IMF extended help to the Kyrgyz Republic in 2010 with a three-month Rapid Credit 
Facility in the amount of around USD 33.7 million, implemented in September-December 
2010. As a follow-up, in June 2011, the IMF agreed with the Kyrgyz Republic authorities 
on  a  follow-up  arrangement  under  the  Extended  Credit  Facility  for  USD  106  million,  in 
support  of  a  comprehensive  economic  adjustment  and  reform  programme  for  the  period 
mid-2011  to  mid-2014.  Other  major  donors  at  the  conference  included  the  World  Bank 
(pledged USD 200 million), and the Asian Development Bank (ADB) (pledged USD 100 
million).  

Shortly  after  the  donor  conference,  in  October  2010,  the  President  and  the  Minister  of 
Finance  of  the  Kyrgyz  Republic  formally  requested  the  EU  MFA  to  complement  the 
financing  from  the  IMF.  In  this  context,  the  Commission  assessed  the  macroeconomic 
situation and financing needs of the Kyrgyz Republic and concluded that the 2010 political 
events and the related social and reconstruction expenditure had left important external and 
fiscal financing needs for the period 2010-12. Furthermore, given the EU’s strong political 
support  for  the  Kyrgyz  Republic’s  incipient  parliamentary  democracy,  the  Commission 
concluded  that  the  political  and  economic  pre-conditions  for  a  MFA  operation  of  a 
moderate amount are satisfied.  

The Kyrgyz Republic is out of the normal geographical scope of MFA, yet in exceptional 
and duly justified circumstances the possibility of approving operations outside that area is 
possible. In this case, the Commission concluded that this MFA operation was justified by 
“the  strength  of  the  political  and  economic  reform  momentum  in  the  country  and  by  its 
position in  a  region  of  strategic  economic  and  political  importance  for  the  EU.  It  would 
provide  a  political  signal  of  strong  EU  support  to  democratic  reforms  in  Central  Asia, 
consistent with the EU policy towards the region [...]”5 

Against this background, and in order to supplement the resources made available by the 
IMF, the European Commission, on 20 December 2011, adopted a proposal to provide up 
to  EUR  30  million  of  MFA  to  the  Kyrgyz  Republic,  in  the  form  of  a  grant  of  EUR  15 
million and a medium-term loan of EUR 15 million. This was accompanied by a detailed 
assessment of the Kyrgyz Republic's needs (See footnote 5). Following the entry into force 
of  the  Lisbon  Treaty,  a  procedural  disagreement  between  the  Council  and  European 
Parliament on the decision-making process of MFA operations delayed the adoption of the 
decision by the co-legislators to 22 October 2013. 

The objectives of the EU’s MFA was to: 

  Contribute to covering the external financing needs of the Kyrgyz Republic and to 

alleviating budgetary financing needs;  

  Support  the  fiscal  consolidation  effort  and  external  stabilisation  in  the  context  of 

the IMF programme;  

  Support  structural  reform  efforts  aimed  at  improving  the  overall  macroeconomic 
management  (e.g.  targeting  the  transparency  and  efficiency  of  public  finance 
management and the financial stability) and at improving conditions for sustainable 
growth.  

The intervention logic for the EU's MFA to Kyrgyzstan is detailed in Figure 5.  

5 European Commission, 2011. Ex-ante evaluation statement on EU macro-financial assistance to the Kyrgyz 
Republic.  Available at: https://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52011SC1619&from=EN 

9 

 
 
                                                 
Figure 5: MFA Intervention Logic  

10 

 
 
3.  Implementation / State of Play  

3.1. Modality and implementation of the MFA programme 

To  achieve  the  objectives  detailed  in  Section  2,  and  as  per  the  usual  MFA  procedure, 
disbursements  under  this  operation  were  tied  to  the  fulfilment  of  country-specific  policy 
conditions,  as  laid  down  in  the  Memorandum  of  Understanding.  The  design  of  the 
conditionality for this programme was subject to negotiations with the Kyrgyz authorities, 
and  additionally  took  into  account  discussions  with  the  EU  Delegation,  the  European 
External Action Service (EEAS) and other DGs, as well as the IMF and the World Bank. 
In  addition,  the  Commission  (DG  ECFIN)  commissioned  an  external  Operational 
Assessment in order to ensure that the public finance management (PFM) system provided 
sufficient safeguards for the MFA programme.  

The  operation  covered  seven  specific  conditions  under  four  reform  areas:  (i)  Public 
Finance Management (PFM), (ii) Financial sector, (iii) Trade policy and Investment, and 
(iv) Business environment. Table 1 below lists the exact structural reforms attached to the 
second  disbursement.6  As  for  most  of  the  MFA  operations,  policy  measures  were  not 
attached to the first instalment, which was conditional only on a satisfactory track record of 
the IMF programme and the fulfilment of the so-called political pre-condition for MFA - 
the  existence  of  effective  democratic  mechanisms  in  place  and  to  respect  the  rule of  law 
and human rights.  

Table 1: Overview of MFA to Kyrgyz Republic  – Size, form, terms and attached reform 
conditions  

  MFA 

  Main Areas of Reform 

characteristics 

“ 

EUR 15 million 
(loan),  
2 disbursement 
dates: 

- EUR 5 million loan 
in October 2015  

* Maturity: 14 years 

** Interest rate: 
1.375%  

- EUR 10 million 
loan in April 2016 

* Maturity: 15 years 

** Interest rate: 
0.70% 

  The structural reforms covered the following areas: 

Area 1: Public Finance Management 

(1) Medium-Term Budget Framework: approval  of a draft resolution  on 
organisational measures for the preparation of the Medium-Term Budget 
Framework  2015  -  2017  and  approval  of  the  draft  republican  budget  of 
the Kyrgyz Republic for 2015 - 2017. 

(2) PEFA: reaching agreement on the Terms of Reference of the PEFA. 

(3) Reform of the accounting and reporting systems: endorsement of the 
following  normative  legal  acts  and  methodological  documents:  (i) 
Accounting policy of the public administration sector; (ii) Regulation for 
preparation  of  financial  reporting;  and  (iii)  Regulation  for 
the 
organization and maintenance of accounting and book-keeping. 

(4)  External  auditing:  development  and  approval  of  an  Action  Plan  for 
upgrading its audit standards to INTOSAI standards. 

Area 2: Financial sector 

6 The specific conditions attached to the MFA programme to Kyrgyzstan are further detailed in Annex 10 of 
the external evaluation report.  

11 

 
 
 
 
 
 
 
                                                 
  MFA 

  Main Areas of Reform 

characteristics 

EUR 15 million 
(grant),  

2 disbursement dates 

(5) Submission of a new Banking Code to the Parliament 

Area 3: Trade policy 

(6)  Official  approval  of  the  report  on  its  trade  policy  to  be  presented  in 
the Trade Policy Review Body of the WTO and development  of a draft 
action plan responding to the recommendations of the WTO Secretariat. 

Area 4: Investment and business environment 

(7)  Enactment  of  the  law  "On  licensing  and  permitting  system  in  the 
Kyrgyz Republic"  

This  operation  was  characterised  by  unusual,  long  delays  throughout  the  process.  The 
Commission adopted the proposal in December 2011, yet the approval by the co-legislators 
was  delayed  until  October  2013  as  mentioned  above.  Subsequently,  the  signature  of  the 
MFA  documents  (i.e.  the  Memorandum  of  Understanding,  the  Loan  Facility  Agreement 
and the Grant Agreement) only took place in October 2014 due to legal issues involving 
the  National  Bank  of  the  Kyrgyz  Republic  (NBKR).  The  MFA  documents  were 
subsequently  ratified  by  the  Kyrgyz  Parliament  in  February  2015,  yet  by  this  time,  the 
2011  IMF  programme  had  expired  (in  July  2014).  A  new  three-year  Extended  Credit 
Facility  (ECF)  was  agreed  with  the  IMF  in  April  2015  and  from  then  onwards, 
disbursements followed more swiftly.  

The operation was disbursed in full, in two instalments, over the period June 2015 - April 
2016: 

  The first instalment: a EUR 10 million grant disbursed in June 2015 and a EUR 5 

million loan disbursed in October 2015; 

  The  second  instalment:  a  EUR  5  million  grant  disbursed  in  February  2016  and  a 

EUR 10 million loan disbursed in April 2016. 

Both  loan  tranches  were  characterised  by  very  long  maturity  (14  years  and  15  years, 
respectively) and low interest rate (1.375% and 0.70%, respectively). See Table 1.  

As MFA is an emergency instrument without legal base, its legislative process consists of 
an ad-hoc agreement on every single MFA operation between the European Parliament and 
the Council under the ordinary legislative procedure (TFEU Art.  212),  which on average 
requires eight months, after which the MFA documents also necessitate sometimes-lengthy 
approval procedures in the beneficiary country. This operation, however, was characterised 
by an exceptionally long timetable between approval and disbursement, largely for reasons 
beyond the Commission’s control. The lifecycle of this MFA programme thus spanned an 
unusually long period from late 2011 to early 2016.  

12 

 
 
 
 
 
 
 
 
Figure  6  below  summarizes  the  timeline  for  this  MFA  operation,  from  the  events  that 
motivated the Commission proposal (See Section 2) to the last disbursements under MFA 
and IMF. 

Figure 6: Timeline for approval and disbursement of IMF and MFA support 

13 

 
 
 
 
Points of comparison  

The  points  of  comparison,  against  which  the  MFA  operation  of  2011-2016  is  assessed, 
refer to the situation in the Kyrgyz Republic (i) prior to the intervention on the one hand 
(Section 2), and (ii) during and after the implementation of the MFA operation on the other 
hand (Sections 3.2 – 3.3).  

The  role  of  MFA  in  promoting  macroeconomic  stability,  easing  external  financing 
constraints and alleviating Kyrgyzstan’s balance of payments and budgetary needs, as well 
as the effectiveness of the structural reforms attached to this MFA programme are analysed 
in Section 5.  

3.2. Economic developments during the lifecycle of MFA (Q4 2011- Q2 2016) 7 

Following the lingering effects of the global economic crisis of 2008-2009 and inter-ethnic 
violence of 2010, the Kyrgyz Republic GDP dropped by 0.5% in 2010. The next year was 
characterized  by  a  rebound  of  6.0%  in  economic  activity,  owing  to  a  full  resumption  of 
trade  and  services  flows,  continued  reconstruction  works,  and  improved  investor 
confidence.  The  external  evaluation  asserts  that  this  renewed  confidence  in  the  Kyrgyz 
economy could have been due to, though not the sole result of, the IMF’s announcement of 
a three-year ECF arrangement (over the period June 2011  - July 2014) and the European 
Commission’s  proposed  MFA  to  Kyrgyzstan,  signalling  important  structural  reform 
actions in key areas. Nevertheless, 2011 was still characterized by a high fiscal deficit and 
a very high external debt (around half of its GDP), making the economy highly vulnerable 
to external shocks.  

While the peaceful transfer of power in 2011 and the swift formation of a new government 
in 2012 laid the foundation for growth, low gold production nevertheless caused GDP to 
contract  in  2012.  The  external  current  account  deficit  widened  substantially,  reflecting 
lower export volumes and a slight fall in gold prices. The trade deficit is estimated to have 
increased  significantly, as  higher purchases of gasoline and diesel  fuel caused imports to 
rise,  while  gold  exports  fell8.  Nonetheless,  strong  and  positive  growth  was  observed  in 
other sectors of the economy, such that the non-gold GDP growth rate was estimated at a 
buoyant 6.3% for 2012.  

In  2013,  economic  growth  soared  to  almost  11.0%,  and  the  current  account  deficit 
narrowed  further.  This  was  driven  by  a  rebound  in  gold  production9,  lower  prices  for 
imported food and fuel, and a sustained improvement in the rest of the Kyrgyz economy.10 
This  strong  growth  was  however  short  lived.  In  2014,  GDP  growth  slowed  to  4.0%, 
reflecting  a  sharp  fall  in  gold  production  and  other  major  supply-side  constraints.  At  the 
same time, the external environment (notably the neighbouring economies of the Russian 
Federation  and  Kazakhstan)  weakened,  while  strong  local  currency  depreciation  pushed 
inflation up. At the end of 2014, external public debt surged to an estimated 51.0% of GDP 

7 For ease of reference and comparison, and unless otherwise stated, this section uses the same dataset as per 
the external evaluation report.  
8 Asian Development Outlook (2013). Available at: 
https://www.adb.org/sites/default/files/publication/30205/ado2013-kyrgyz-republic.pdf 
9 In 2013, the Kyrgyz government reached an agreement with the Canadian–based gold mining company, 
Centerra, allowing for joint ownership of the Kumtor mine. The agreement led to the resolution of a long-
standing dispute, which drove gold mining and production to resume.  
10 Asian Development Outlook (2014). Available at: 
https://www.adb.org/sites/default/files/publication/31241/ado2014-kyrgyz-republic.pdf 

14 

 
 
 
                                                 
from 43.7% a year earlier, whilst the current account deficit is estimated to have risen to 
around 15% of GDP from 14.1% in 2013.11  

In 2015, GDP growth slowed to 3.9%. Continued recession in the Russian Federation and a 
slowdown in neighbouring Kazakhstan weighed heavily on the economy. External public 
debt soared to 63.0% of GDP from 51.0% a year earlier, mainly reﬂecting local currency 
depreciation.  Kyrgyzstan’s  vulnerable  balance  of  payments  situation  was  reflected  in  the 
structurally large and sustained current account deficit, which widened to 17% in 2015.12   

The Kyrgyz economy further contracted in the first half of 2016, as a sharp decline in gold 
output  (-35.6%)  coincided  with  weak  performance  in  the  non-gold  sector,  in  particular 
industry and service.  

The  Commission  disbursed  the  first  instalment  of  the  MFA  programme  to  the  Kyrgyz 
Republic (comprising of EUR 10 million in grants and EUR 5 million in loans) in June and 
October 2015, respectively. The second and final instalment (comprising EUR 5 million in 
grants  and  EUR  10  million  in  loans)  was  disbursed  in  February  and  April  2016, 
respectively.  The  disbursements  coincided  with  a  time  of  sluggish  economic  growth  in 
Kyrgyzstan as the Russian economic crisis began unfolding (See Figure 7). 

Figure  7  below  illustrates  an  overview  of  Kyrgyzstan’s  economic  situation,  measured  by 
GDP growth  rate over  the lifecycle of this MFA, including also specific events that  help 
clarify the developments observed over these periods. 

Figure 7: Trends in quarterly GDP growth rates observed for Kyrgyzstan, 2011(Q4)-2016(Q2) 

Source: ICF External evaluation report  

11 Asian Development Outlook (2015). Available at: 
https://www.adb.org/sites/default/files/publication/154508/ado-2015.pdf 

12 Asian Development Outlook (2016). Available at: 
https://www.adb.org/sites/default/files/publication/182221/ado2016.pdf 

15 

 
 
 
 
                                                 
 
 
Furthermore,  Figures  8  to  13  illustrate  the  economic  developments  over  2011-2017,  as 
described above. 

Figure 8.  Decomposition of real GDP trend, 2011 - 2017, in % of GDP 

Source: NSC 

Figure 9.  Current account balance and its main components, in USD billion 

Source: NBKR 

16 

 
 
 
 
 
 
 
 
 
 
Figure 10.  General government revenue & expenditure (left axis), and deficit (rights axis), in % 
of GDP 

Source: IMF 

Figure 11.  Public debt, in % of GDP 

Source: MoF 

17 

 
 
 
 
 
 
 
 
Figure 12.  Deposits and loans by banks and micro-financial organizations, in % 

Source: NBKR 

Figure 13.  Inflation rate (left axis) and official exchange rate (right axis) 

Sources: NSC, NBKR 

18 

 
 
 
 
 
 
 
 
 
 
 
3.3. Economic developments after the implementation of MFA 

Economic growth in Kyrgyzstan over 2016 and 2017 was close to the long-term average 
(2000 - 2015) GDP growth value of about 4.5%. This was supported by some recovery in 
the neighbouring economies (especially Russia and Kazakhstan) and increase in the inflow 
of  remittances.  The  debt  and  fiscal  situations  have  somewhat  improved,  and  inflation 
remains below 5% per annum. 

In 2018, the economy continued showing signs of recovery, benefiting from stable regional 
and  external  environment.  GDP  growth  was  estimated  at  3.5  percent,  whilst  inflation 
averaged 1.5 percent for the year. Fiscal deficit stands moderately at 1.3 percent of GDP, 
gross  official  foreign  exchange  reserves  at  4.0  months  of  imports  and  a  stable  banking 
sector  point  to  the  success  of  stabilization  policies,  carried  out  by  the  government  and 
National Bank of the Kyrgyz Republic (NBKR).13  

The latest assessment of the IMF (IMF, 2019) positively notes that, ‘’[…] While significant 
risks  remain, debt  and financial sector vulnerabilities  have  subsided. The authorities are 
committed  to  prudent  macroeconomic  policies  and  implementation  of  structural  reforms, 
and see them as essential to promoting higher and more inclusive growth and to increase 
economic resiliency. Monetary policy remains appropriately focused on maintaining price 
stability.’’ 

Looking  ahead, growth  in  Kyrgyzstan is  expected to  recover to  around 4.0%  in  2019, as 
per the latest  forecasts  of the IMF (World  Economic Outlook  Database, April 2019),  the 
World Bank (Global Economic Prospects, June 201914) and the Asian Development Bank 
(Asian  Development  Bank  Outlook,  201915).  The  medium-term  growth  prospects  are 
shaped however by downside risks (i.e. slowdown in the region, especially in Kazakhstan 
and  the  Russian  Federation,  the  country’s  two  main  regional  partners;  lower  remittance 
inflow; difficulties attracting foreign direct investments etc.). While debt sustainability has 
improved, the IMF assesses the country as facing moderate risk of debt distress because of 
continuing vulnerability involving currency stability and possible deterioration in the fiscal 
balance.  For  2020-2024,  the  IMF  predicts  less  buoyant  activity,  with  GDP  growth 
averaging around 3.0%. The latter value may be related to the gradual closure of Kumtor 
gold mine (amongst the largest contributors to the GDP of Kyrgyzstan), expected to start in 
2022-2023.  

3.4 Continued support from the EU after the implementation of MFA 

Kyrgyzstan  will  continue  to  be  an  important  partner  for  the  EU.  The  EU  operates  in  the 
Kyrgyz  Republic  on  the  basis  of  the  Partnership  and  Cooperation  Agreement  which  has 
been in force since 1999. In July 2019, the EU and Kyrgyzstan initialled a new Enhanced 
Partnership  and  Cooperation  Agreement  (EPCA).  This  is  the  second  EPCA  to  be 
concluded  with  a  Central  Asian  country  (after  Kazakhstan),  creating  the  conditions  for 
strengthened trade relations in a region of strategic interest for the EU, as outlined by the 

13 IMF (2019). Available at: https://www.imf.org/en/News/Articles/2019/03/20/pr1981-kyrgyz-republic-imf-
staff-completes-2019-article-iv-mission-to-the-kyrgyz-republic 
14 World Bank (2019). Available at: http://pubdocs.worldbank.org/en/956691557323120176/Global-
Economic-Prospects-June-2019-Analysis-ECA.pdf 
15 Asian Development Bank (2019). Available at: 
https://www.adb.org/sites/default/files/publication/492711/ado2019.pdf 

19 

 
 
 
  
 
                                                 
recent Joint Communication on the EU and Central Asia16. Moreover, Kyrgyzstan is one of 
the  countries  where  the  EU  implements  its  new  EU  strategy  on  Central  Asia,  adopted  in 
June 2019.  

Meanwhile, for the timeframe 2014 - 2020, the EU will have allocated EUR 174 million of 
bilateral aid to the Kyrgyz Republic in grants. The focal sectors were rule of law, education 
and  integrated  rural  development/social  protection  and  public  finance  management.  The 
most important implementation modality is budget support (with operations on education, 
social  protection,  and  electoral  reform).  Kyrgyzstan  is  also  the  main  beneficiary  of  the 
Investment Facility for Central Asia (IFCA). During the same period, it received a total of 
EUR  73.4  million  in  grant  contributions,  which  catalysed  investments  of  over  EUR  300 
million.   

4.  Method  

This ex-post evaluation has been undertaken by an external contractor and was carried out 
from March 2018 to April 2019. The external evaluation, whose progress and quality was 
monitored  by  an  Inter-service  Steering  Group  (ISG),  included  the  following  steps:  an 
inception report (which explained how the evaluation design would deliver the information 
required),  field visits  to Kyrgyz Republic, Belgium and the United  States for discussions 
with key, targeted stakeholders, an interim report and a final report (providing responses to 
evaluation  questions).17  The  Evaluation  was  carried  out  in  line  with  the  principles 
commonly  applied  for  the  evaluation  of  EU  initiatives,  as  laid  down  in  the  Better 
Regulation Guidelines.18 This included the publication of an evaluation roadmap19 between 
22 December 2017 – 19 January 2018 and the incorporation of feedback, where relevant, 
in  the  external  evaluation  report.  The  methodology  employed  was  comprehensive  and 
responded to the very specific and unique nature of the MFA operation.   

For the evaluation  conducted by the external contractors, the evidence and the data were 
collected  through  several  complementary  approaches,  including  (i)  a  theory  based 
approach (See Section 2 from external evaluation report), (ii) participatory approaches to 
data  collection  and  analysis;  (iii)  quantitative  and  qualitative  research  methods;  and  (iv) 
triangulation. Overall, the quality of the collected evidence by the external contractor (data, 
documentation, interviews and survey results) for this evaluation can be assessed as very 
good, within the limitations mentioned below.  

The  qualitative  research  was  grounded  in  logic  and  economic  theory,  whilst  the 
quantitative fieldwork was based on reliable statistical data, and purposeful sampling was 
used  for  the  interviews  and  the  focus  group  discussion.  To  collect  a  broad,  multi-
dimensional  and  triangulated  picture  of  the  economic,  financial  and  structural  issues 
surrounding  the  programme,  a  wide  range  of  relevant  stakeholders  and  civil  society 
organisations  was  also  involved.  Based  on  this  and  the  triangulation  of  evidence,  this 
evaluation can be considered reliable and valid.  

The  data  collection  methods  and  analytical  techniques  used  to  address  the  evaluation 
criteria’s are explained below.  

16 https://eeas.europa.eu/sites/eeas/files/joint_communication_-_the_eu_and_central_asia_-
_new_opportunities_for_a_stronger_partnership.pdf 
17 The evaluation’s procedural information is detailed in Annex 1. 
18 European Commission, July 2017, https://ec.europa.eu/info/files/better-regulation-guidelines_en    
19 https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-6341347_en  

20 

 
 
 
 
                                                 
Documentary review 
The evaluation is based on an in-depth review of documentation assembled from a variety 
of sources, including the European Commission, IMF, WB, Kyrgyz authorities and others. 
A full list of references is available in Annex 2.  

Macroeconomic data analysis (including Debt Sustainability Analysis)  
The evaluation examined how the key macroeconomic indicators have evolved over time 
and  specifically,  the  direction  and magnitude  of  the  changes  observed over  the  period  of 
interest (before, during and after the MFA implementation) as well as any deviations from 
the initial projections made by the IMF and the underlying reasons for these. Similarly, the 
Debt Sustainability Analysis (DSA) involved an analysis of key debt-burden indicators and 
macroeconomic variables, which influence the path of a country’s debt and its capacity to 
manage  this  burden  sustainably  in  the  medium  term  to  long  term.  This  was  carried  out 
using  the  DSA  toolkit  developed  by  the  IMF  and  the  WB  that  is  the  benchmark  tool  for 
analysing debt sustainability of countries.  

Interviews with key informants/ stakeholders 
Interviews with key stakeholders constituted an essential part of the fact-finding work. A 
total of 41 interviews were held in several rounds over the course of 2018. They covered a 
wide variety of issues related to the design and implementation of the MFA programmes, 
their 
to  Kyrgyz,  progress  with 
macroeconomic stabilisation and implementation of structural reforms, and others. 

the  overall  financial  support  package 

impact, 

Focus Group with development partners 
Towards the end of the evaluation, a one-day focus group discussion was organised with 
locally-based  development  actors  to  complement  as  well  as  cross-check  information 
collected from other sources such as desk research and key informant interviews. 

Qualitative counterfactual analysis 
The external contractor adopted a qualitative approach in this evaluation to counterfactual 
analysis.  Specifically,  the  external  evaluators  applied  counterfactual  reasoning  within  a 
qualitative  framework  (using  a  theory-based  approach)  to  draw  inferences  regarding  the 
role  and  contribution  of  the  MFA  in  promoting  macroeconomic  stabilisation  and 
cushioning  the  social  impact  of  the  crisis.  Evidence  and  insights  collected  from  desk 
research,  interviews,  focus  group  and  expert  opinions  were  used  to  deduce  what  might 
have  happened  in  the  absence  of  the  MFA  (and  IMF).  The  external  report  also  paid 
particular  attention  to  ensuring  that  the  counterfactual  scenario(s)  and  any  inferences 
drawn  were  grounded  in  logic  and  economic  theory.  This  was  an  appropriate  approach 
given  the  difficulty  of  constructing  reliable  counterfactual  scenarios  using  econometric 
techniques or macro-economic models in a crisis context.   

Social Impact Analysis (SIA) 
The evaluation examined the role and contribution of the MFA operation in cushioning the 
social  impacts  of  the  crisis.  This  was  done  by  analysing  trends  in  a  number  of  social 
indicators prior to, during and after the MFA operation, and then applying counterfactual 
analysis to determine outcomes. 

The  detailed  approach  to  the  SIA  is  presented  in  Annex  13  of  the  external  evaluation 
report.  

21 

 
 
Limitations and Methodological Issues  

While  the  overall  reliability  and  validity  of  the  evaluation  is  strong20,  a  number  of 
methodological limitations and challenges effected the evaluation:  

  The access and the quality of the macroeconomic data in the Kyrgyz context has 
been  satisfactory,  yet  there  were  exceptions  whereby  the  contractors  could  not 
trace  particular  events.  The  external  contractor  specifies  that  “[…]  the  data 
related to the financial assistance provided by Russia is somehow obscure and the 
study required an assumption regarding the specific grant disbursement in the late 
2015 that was announced by the Kyrgyz officials, but without any evident traces 
in the data published by the Ministry of Finance.” 

  When  organising  and  conducting  interviews,  the  contractors  were  faced  with 
‘memory  loss’  as  in  certain  cases  stakeholders  were  unable  to  recall  in  detail 
aspects related to the programmes or/and the relevant context due to the time that 
had  elapsed.  Moreover,  there  was  a  consistent  and  relatively  pronounced 
reluctance among interviewees to express their views on matters that could have 
been seen by them as potentially sensitive. Additionally, with respect to the one-
day  focus  group  discussion  organised  with  locally-based  development  actors, 
most participants had very limited awareness and knowledge of the MFA.  

  Evaluating the outcomes of MFA programmes  is particularly challenging, since 
financial  support  normally  has  a  lagged  impact  on  the  real  economy. 
Furthermore,  it  was  difficult  to  isolate  the  impact  of  MFA  from  other 
interventions (IMF, WB, other EU interventions, support from other donors etc.) 
and other exogenous factors, particularly during the abnormally longer timeframe 
of the operation.  

  Similarly,  with  respect  to  the  Debt  Sustainability  Analysis,  the  un-earmarked 
nature of MFA implies that it was not possible to trace down how MFA funding 
was  exactly  used  (i.e.  maintain  public  expenditure;  meet  the  foreign  debt 
repayment obligations etc.). 

The  ISG  as  well  as  other  staff  from  DG  DEVCO,  EEAS  and  the  EU  delegation  in 
Kyrgyzstan actively participated in dealing with these challenges, including by providing 
missing data to the evaluators and multiple rounds of feedback.   

In turn, the identified risks and limitations do not put into question the overall reliability of 
the  evaluation  analysis  as  they  were  mitigated  by  the  fact  that  information  was  obtained 
from a wide range of sources, using different evaluation techniques, alternative scenarios 
and multiple rounds of feedback.  Therefore, the conclusions reached in the evaluation can 
be considered as valid.  

20 For a more detailed overview of the main elements underpinning reliability and validity of findings, refer 
to Annex 3.  

22 

 
 
 
 
                                                 
5.  Analysis and answers to the evaluation questions  

5.1 

Relevance   

Question 1: To what extent was the MFA operation design (including adequateness of 
financing envelope,  focus of  conditionality)  appropriate in relation to  the  outputs  to 
be produced and objectives to be achieved? 

By  2010,  following  the  lingering  effects  of  the  global  economic  crisis  of  2008-2009  and 
inter-ethnic violence of 2010, Kyrgyzstan was facing pressing external and fiscal financing 
needs. The size of Kyrgyzstan’s financing gap was estimated at USD 271 million and USD 
149 million for 2011 and 2012 respectively. However, as a result of procedural delays (see 
Section 3), the MFA disbursements took place in 2015 (EUR 15 million) and 2016 (EUR 
15 million), where the size of the country’s financing gap was slightly improved.  

As  indicated  in  Table  2  below,  actual  MFA  disbursements  corresponded  to  around  10% 
and  22  %  of  the  financing  gaps  in  2015  and  2016.  The  amounts  accounted  for  14%  and 
12% of the total assistance package (budget support financing exclusively) provided by the 
multilateral and bilateral donors in 2015 and 2016, and corresponded to around 0.3% of the 
GDP each year21. In this context, the external evaluation report confirm that the size of the 
MFA operation in Kyrgyzstan was of a satisfactory amount, particularly since it was only 
intended  to  supplement  the  assistance  offered  by  the  IMF  and  other  international  and 
bilateral donors.  

Table 2: Kyrgyzstan’s financial requirements (2011-2016)  

Financing requirements 

Estimated financing gap 

Donor Financing 

   IMF ECF disbursement 

   WB 

2011 

271.0 

29.8  

30.0 

   EURASEC anti-crisis fund 

106.7 

   ADB 

   Other grants 

   EU (Sectoral Budget Support      
Programmes) 

50.6 

n/a 

16.4 

   EU (MFA) – in USD million 

20.5 

2012 

149.0 

29.7  

n/a 

n/a 

n/a 

n/a 

17.1 

20.5 

2015 

171.5 

28.9 

40.9  

n/a 

n/a 

70.0 

n/a 

2016 

76.8 

28.9  

34.5  

n/a 

n/a 

0.0 

n/a 

16.498* 

16.776* 

Originally 
planned 

Based 
on 
disbursements 

actual 

EU MFA – as a share of the 
financing gap 

8% 

14% 

10% 

22% 

Source: ICF Evaluation & Internal European Commission calculations 

21 For more detail, see Section 7.1.2 of the external evaluation report. 

23 

 
 
 
 
 
 
 
 
 
 
 
                                                 
With  respect  to  timing,  some  stakeholders  argued  that  the MFA  was  somehow  less  vital 
during the disbursement period. Nevertheless, the external evaluation confirms that despite 
the  delays  in  disbursement,  the  MFA  was  still  relevant  in  2015-2016  as  they  coincided 
with important debt repayment obligations and with the time Kyrgyzstan faced difficulties 
as the Russian economic crisis began unfolding. 

The  MFA  comprised  an  equal  mix  of  grants  and  loans,  reflecting  the  compromise 
reached  between  the  Council  of  the  European  Union  (who  strongly  opposed  grant-only 
financing to Kyrgyzstan) and the European Parliament. The interviewed stakeholders and 
the  external  contractors  judged  this  appropriate,  particularly  in  the  context  of  the  overall 
package  of  EU  support  (which  comprised  a  significant  grant  component).  Furthermore, 
the  un-earmarked  nature  of  MFA 
Kyrgyz  government  officials  have  regarded 
disbursements  and  the  highly  concessional  terms  of  the  MFA  loans  as  important  and 
attractive characteristics of this MFA operation.   

The  MFA  conditionality  reform  package  aimed  to  address  structural  weaknesses 
affecting Kyrgyzstan. In turn, the seven structural conditions attached to the MFA covered 
four reform areas: (1) public finance management (PFM); (2) banking; (3) trade;  and (4) 
business and investment. The specific conditions that were part of the MFA programme to 
Kyrgyzstan are detailed in Annex 10 of the external evaluation report.  

The  evaluation  confirmed  that  all  seven  MFA  conditions  included  in  the  MoU  were 
considered  relevant  back  in  2013  at  the  time  of  the  MoU  negotiations.  The  Kyrgyz 
authorities  were  effective  in  the  implementation  of  the  conditionality,  meeting  six  out  of 
seven conditions prior to the signature of the MoU in October 2014.22 In turn, a number of 
interviewed stakeholders from the EU delegation questioned (1) the appropriateness of the 
conditions by the time the MFA was formally approved and disbursed, and (2) the extent to 
which  the  EU  could  have  re-opened  the  negotiations  and  revised  the  specific  MFA 
conditions.  Nevertheless,  swift  implementation  of  MFA  reforms  is  not  uncommon,  as 
authorities speed up the reform process to ensure that MFA will be disbursed, and convey 
the  right  commitment  signals  to  the  donor  community.  In  addition,  any  re-opening  of 
discussions  related  to  this  programme  could  have  resulted  in  further  delays  with  the 
disbursements,  thus  seriously  undermining  the  relevance  of  the  entire  operation  and 
triggered further tensions between the EU and the Kyrgyz government. This argumentation 
is  shared  by  the  external  contractor  in  their  detailed  assessment  of  the  relevance  of  this 
MFA in Section 7 and Section 8.2.2 of their final report.  

Finally,  MFA  reforms  were  generally  in  line  with  the  priorities  set  by  the  Kyrgyz 
government  as  well  as  other  donors  /  IFIs  (as  part  of  their  support  programmes).  These 
were also consistent with wider objectives associated with EU MFA operations, notably to 
promote  structural  measures/reforms  capable  of  driving  and  maintaining  macroeconomic 
stability.  

The evaluation concludes that overall, at a thematic level, all areas of conditionality were 
relevant and well chosen.  

5.2 

Effectiveness of MFA  

Question 2: To what extent have the objectives of the MFA operation been achieved? 

22 The MoU policy conditions were negotiated on the assumption that they would have to be met by June 
2014, i.e. before the expiry of the 2011 IMF Extended Credit Facility (ECF).  

24 

 
 
 
                                                 
The  objectives  of  MFA  to  Kyrgyzstan  are,  as  set  out,  inter  alia,  in  the  Memoranda  of 
Understanding  (MoU)  to  “support  the  restoration  of  a  sustainable  external  financial 
situation for the Kyrgyz Republic, to alleviate its balance of payments and budgetary needs 
and thereby support its economic and social development.” Beyond this, the objectives are 
also to support structural reforms. 

The external evaluators relied on two strands of analysis to answering this question:  

Part 1: The role of MFA in promoting macroeconomic stability, easing external financing 
constraints and alleviating Kyrgyzstan’s balance of payments and budgetary needs 

The exact impact of the EU financial support on economic outcomes is inherently difficult 
to quantify, in particular due to external factors and the fact that MFA was only part of the 
international  support  package.  Nevertheless,  the  evaluation  employs  a  set  of  quantitative 
and qualitative analysis tools to get to plausible alternative scenarios.   

With the disbursements corresponding to around 0.3% of GDP in both 2015 and 2016, the 
EU MFA was not negligible and contributed to the stabilisation of the Kyrgyz economy. 
At  the  same  time,  the  absence  of  the  MFA  (‘Scenario  1’)  would  not  have  caused 
significant, adverse economic impacts.  

The  impact  of  this  MFA  on  the  sustainability  of  the  Kyrgyz  debt  was  considered 
positive,  yet  not  too  significant.  Results  from  the  Debt  Sustainability  Analysis  (DSA) 
(Section 5.7) show that having the MFA operation will lower the present value of the debt-
to-GDP  ratio  by  1.6  percentage  points  on  average  over  2015  -  2025,  compared  to  not 
having  the  MFA.  On  the  other  hand,  results  from  the  Social  Impact  Analysis  (SIA) 
(Section 5.6) show that the impact of this MFA on the social situation was considered less 
prominent,  mostly  because  none  of  the  MoU  conditionality  specifically  refers  to  social 
policies  and/or  outcomes.  Yet,  evidence  gathered  from  interviews  with  Kyrgyz’s  civil 
society  points  to    the  MFA  operation  providing  the  EU  with  some  leverage  in  its 
discussions  on  the  controversial  ‘anti-LGBTI  ‘and  ‘foreign agents’  bills  with  the  Kyrgyz 
authorities. The Kyrgyz government ultimately did not pursued these laws for adoption in 
the parliament.23 

Furthermore, the evaluation did not find evidence suggesting that the sole absence of the 
MFA financing could have had any material impact on business and investor confidence. 
This  could  be  explained  in  part  by  the  low  awareness/visibility  surrounding  this  MFA 
operation (due to the experienced delays and the smaller magnitude of the MFA compared 
to  assistance  from  other  donors).  In  this  context,  a  presumed  negative  impact  on  foreign 
exchange  rates,  inflation  and  households’  disposable  incomes,  in  the  absence  of  the  EU 
MFA, is also unlikely. 

With respect to financing, the Kyrgyz government could potentially have resorted to other 
options had MFA not been implemented, thus containing the expected negative impact on 
aggregate demand. Figure 14 overleaf presents these options together with the likelihood 
of  each  happening.  Overall,  there  was  a  high  level  of  consensus  among  all  stakeholders 
regarding  these  hypothetical  scenarios,  with  the  most  likely  being  that  the  government 
would have withdrawn some of its reserve deposits at the central bank, undertaken cuts in 
public expenditure, and/or sought increased assistance from Russia.  

23 For more detail, refer to Box 4 of the external evaluation report.  

25 

 
 
 
 
                                                 
Figure 14.  Alternative scenarios for obtaining finance had MFA not been available (but with 
IMF continuing)  

Source: ICF External Evaluation Report 

With respect to structural reforms, the MFA programme was effective in bringing about 
additional  stimulus  for  reform  in  priority  areas,  and  encouraging  the  implementation  of 
specific,  short-term,  measures  that  may  have  otherwise  been  overlooked  by  national 
authorities, primarily owing to a lack of financing. At the same time, the reforms were not 
found to  have  had  a  significant impact on economic outcomes,  predominantly due to the 
limited scope and since some were intended to pave the way for more extensive reforms 
(driven by the EU and/or other international donors) over the medium to longer term. 

The hypothetical absence of both the EU’s MFA and IMF’s ECF (‘Scenario 2’) would 
have  had  more severe implications. This is not surprising, given that by its nature, MFA 
is meant to compliment IMF programmes, and that, it usually comes in smaller magnitudes 
compared to the IMF loans.  

The  evaluation  finds  that  the  absence  of  the  EU’s  MFA  and  the  IMF’s  ECF  would  have 
most  certainly  affected  the  financing  provided  by  other  donors,  particularly  the  World 
Bank  who  requires  a  stable  macroeconomic  framework  to  deploy  its  budget  support 
operations  (e.g.  Development  Policy  Operation(s)).  In  nominal  terms,  the  absence  of  the 
assistance provided by the EU, the IMF and the WB in 2015 (i.e. USD 29 million from the 
IMF, USD 16.5 million from the WB and USD 16.5 million from the EU via the MFA), 
would have corresponded to a financing gap of USD 62 million, or ~1 % of GDP in 2015 
only.  In  turn,  this  would  have  resulted  in  consequences  that  are  more  significant. 
According to the IMF, the depth of the spending cuts would have been greater, most likely 
affecting  social  spending.  A  potentially  deeper  loss  of  business  and  investor  confidence 
would have triggered inter alia, an even greater depreciation of the national currency and a 

26 

 
 
 
 
 
 
 
further hampering  of FDI.  In  addition, a ‘no  MFA and IMF’ alternative would have also 
resulted in foregone benefits from the IMF reform package. 

Part 2: Effectiveness of structural reforms 

The  Kyrgyz  authorities  fulfilled  all  the  economic  and  structural  policy  conditions 
related to the disbursement of the MFA, without the need for waivers. Implementation 
was swift, as six out of seven conditions were fulfilled prior to the approval and signature 
of  the  MoU  in  October  2014.  Some  of  the  interviewed  stakeholders  questioned  the 
appropriateness  and  effectiveness  of  the  MFA  conditions  and  whether  the  Commission 
should have re-negotiated more meaningful reforms with the Kyrgyz. The evaluation finds 
fully justified that the Commission did not re-open negotiations to avoid further delays that 
would  have  only  amplified  tensions  that  prevailed  at  the  time  between  the  Kyrgyz 
government  and  the  EU24.  Furthermore,  interviewed  stakeholders  from  the  Commission 
explained why the effectiveness of the reforms attached to this MFA need to be assessed in 
the light of the exceptional and highly political nature of this operation. Indeed this MFA 
was considered an additional political gesture of the EU in endorsing the country’s efforts 
towards  becoming  a  fully-fledged  parliamentary  democracy  (rather  than  purely  an  anti-
crisis  support  mechanism  aiming  to  stabilise  the  economy).  The  MFA  reform  package 
conferred added leverage to the EU in its discussions of the anti-LGBTI and foreign agents 
bills  with  the  Kyrgyz  authorities  that  allowed  for  the  withdrawal  of  these  laws  back  in 
2015/2016.  

5.3 

Efficiency 

Question  3:  Was  the  disbursement  of  the  financial  assistance  appropriate  in  the 
context  of  the  prevailing  economic  and  financial  conditions  in  the  beneficiary 
country? 

Question  4:  In  what  way  has  the  design  of  the  MFA  assistance  conditioned  the 
performance of the operation in respect to its cost and its objectives?  

The timing of the disbursements of this MFA operation (over June 2015 and April 2016) 
were  still  relevant  and  appropriate  given  the  economic  difficulties  that  prevailed  in 
Kyrgyzstan at the time (See Section 2).  

Throughout the  process,  the  frequent  dialogues  between  the  EU  (via  DG  ECFIN  and  the 
EU Delegation) and Kyrgyz authorities were critical in supporting the understanding and 
commitment  to  MFA  conditionality  and  management  of  disbursements.  In  general, 
stakeholders  consulted  during  the  evaluation  acknowledged  a  smooth  running  of  the 
negotiation process, with respondents from the EU delegation emphasising the importance 
of  technical  assistance  support  accompanying  the  implementation  of  certain  reforms  (for 
both this MFA operation and other EU’s budget support programmes).  

The  Commission  also  closely  coordinated  its  activity  with  other  international 
creditors, in particular the IMF and the WB, thereby ensuring that actions/reforms under 
the  EU  MFA  complemented  those  promoted  by  other  donors  on  the  ground.  The  main 

24 The interviewees (EU Delegation in Bishkek, the Presidential Office, the Ministry of Finance, EEAS and 
IMF staff) confirmed that the protracted implementation of this MFA constituted a strain on the political 
relationship between the EU and the Kyrgyz authorities.  

27 

 
 
 
 
 
                                                 
synergies  were  achieved  in  the  public  financial  management,  banking  and  trade  policy 
areas.  

a  window  of  opportunity 

On  a  national  level,  synergy  was  also  existent  between  the  MFA  conditionality  and 
national  policies.  Interviewed  stakeholders  acknowledge  that  in  some  instances  MFA 
opened 
in 
to 
promoting/accelerating  their  own  reform  plans.  Overall,  the  Kyrgyz’s  reform  ownership 
was  appropriate  and  there  was  no  need  for  waivers.  On  the  EU’s  side,  the  monitoring 
process  was  frequent  and  adequate  and  the  Commission  complied  with  all  checks 
ensuring  that  Kyrgyzstan  had  satisfactory  fulfilled  the  reform  measures  supported  by  the 
MFA. 

government  departments 

some 

In terms of visibility, evidence gathered from local stakeholders and various development 
partners indicates poor visibility of the EU MFA in Kyrgyzstan. This is partly explained 
by the delays experienced during the negotiations and disbursements, which, equally, did 
not  receive much  attention  at  national  level.  In  this  context, with  the  aim  to  improve  the 
visibility and public understanding of MFA programmes more generally, the Commission 
started  in  mid-2014  to  publish  on  the  web  site  of  DG  ECFIN  the  Memorandum  of 
Understanding that lays down the reform measure related to the operations.  

5.4 

EU Value Added 

Question 5: What was the rationale for an intervention at EU level and to what extent 
did  the  MFA  operation  add  value  compared  to  other  interventions  by  other 
international  donors?  Did  the  operation  actually  lead  to  the  expected  impacts  and 
added  value  of  international  cooperation,  and  what  can  be  learnt  for  future 
operations? 

The  response  to  the  economic  and  socio-political  crisis  hitting  Kyrgyzstan  around  2010 
(See Section 2) required active co-operation of all international partners, both in terms of 
financial  commitments  and  agreement  on  the  type  of  conditionalities  proposed.  The  EU 
was a constructive party to these discussions, and overall, the added value from the EU’s 
MFA to Kyrgyzstan was judged positive by the external evaluators.   

The  size  of  the  MFA  operation  (EUR  30  million  or  0.3%  of  GDP  in  2015  and  2016), 
though  relatively  smaller  when  compared  to  the  IMF  programme,  made  a  significant 
contribution in terms of financial value added. An important attribute of the EU MFA 
versus alternative sources of financing was its highly concessional terms, i.e. relatively low 
interest  rates, long  maturity  and long grace  period.  As pointed out  in  the evaluation, this 
generated  fiscal  space  for  the  Kyrgyz  government  at  a  time  when  the  country  was  faced 
with various economic difficulties as well as preparing for parliamentary elections. 

The  external  evaluation  finds  that  the  EU  added  value  was  most  apparent  in 
strengthening the promotion of structural reforms in several priority areas. The MFA 
conditions  generally  supplemented  reforms  driven  by  existing  EU  support  programmes25 
and  by  key  international  donors,  such  as  the  IMF  and  the  WB26.  This  reinforced  the 
rationale for adjustment measures and provided local authorities with an impetus to reform 
swiftly  in  targeted  sectors.  More  broadly,  however,  interviewed  stakeholders  from  the 

25  PFM reforms,  for  instance, were  central  to  the disbursement  of  specific  EU support packages,  including 
Sector Reform.  
26  The  World  Bank,  for  instance,  indicated  during  the  stakeholder  consultation  that  the  EU  MFA  laid  the 
groundwork for the PEFA, which was eventually undertaken in 2014. 

28 

 
 
 
 
                                                 
IMF,  WB,  DG  ECFIN  and  the  EU  Delegation  reported  low  and  varying  level  of  reform 
ownership among Kyrgyz authorities. In turn, various projects led by the IMF, such as the 
Financial  Management  Information  System  (FMIS)  and  the  Banking  Code,  were  not 
materialising.  

Beyond economic reforms, the EU MFA served wider political objectives in the Kyrgyz 
context,  enhancing  bilateral  political  relations.  Moreover,  the  actual  disbursements 
(coincidentally)  came at a politically important moment ahead of parliamentary elections 
and thus served as a signal of EU support to democratic reforms in Central Asia, consistent 
with  the  EU  policy  towards  the  region.  Furthermore,  though  the  EU  MFA  did  not 
specifically  target  social  reform,  interviews  conducted  with  EU  and  Kyrgyz  stakeholders 
suggest  that  the  MFA  played  an  important  role  in  driving  the  Kyrgyz  government  to 
prevent the enactment of  two controversial laws back in 2015 and 2016, notably the ‘anti-
LGBTI’ and ‘foreign agents’ laws. 

Overall,  however,  the  EU’s  value  added  was  hampered  by  the  delays  experienced 
during  the  implementation  of  this  MFA  operation.  Interviewed  stakeholders  felt  that 
these delays had adversely impacted the extent of awareness and visibility surrounding the 
operation.  Moreover,  this  was  a  completely  new  operation  for  Kyrgyzstan  and  the 
conditions  associated  with  it  were  viewed  as  “too  technical”  and  difficult  to  convey  to 
“laymen.”27 

5.5 

Coherence 

Question 6: Were the measures of the MFA operation in line with key principles, 
objectives and measures taken in other EU external actions towards Kyrgyz 
Republic? 

The  European  Union  and  the  Kyrgyz  Republic  have  been  partners  since  the  country's 
independence in 1991, increasing their cooperation and areas of interaction year-on-year. 
The  EU’s  support  is  channelled  through  various  instruments,  including  the  Development 
Cooperation  Instrument,  the  Regional  Indicative  Programme  (RIP)  for  Central  Asia,  the 
Investment  Facility  for  Central  Asia  (IFCA),  and  various  other  thematic  programmes, 
humanitarian and budget support operations, including MFA.  

As  a  sign  of  renewed  commitment,  in  May  2019,  the  Commission  and  the  High 
Representative of the Union for Foreign Affairs and Security Policy adopted a new  Joint 
Communication28  that  sets  out  a  fresh  vision  for  a  stronger  partnership  with  the  five 
countries of Central Asia, including the Kyrgyz Republic. The Commission and the High 
Representative/Vice-President presented  the new EU Strategy on Central Asia at the 15th 
EU-Central  Asia  Ministerial  meeting,  which  took  place  on  7  July  in  Bishkek,  Kyrgyz 
Republic. 

More  specifically  on  MFA,  over  the  period  2012  -  2016,  between  30  and  50%  of  EU 
assistance  to  the  Kyrgyz  Republic  was  delivered  in  the  form  of  budget  support  or  MFA 
grants. Figure 15 below illustrates.  

27 Workshop with development partners. 
28 Joint Communication available at: https://eeas.europa.eu/sites/eeas/files/joint_communication_-
_the_eu_and_central_asia_-_new_opportunities_for_a_stronger_partnership.pdf 

29 

 
 
 
 
                                                 
Figure 15 - EU external aid to Kyrgyzstan, by type, over 2010 - 2016 (in EUR million)  

Source: Annual Report on the implementation of the European Union’s instruments for financing external actions and 
DEVCO  disbursement  data.  Please  note  that  there  is  little  information  available  on  the  types  of  EU  aid  provided  to 
Kyrgyzstan prior to 2012. 

In turn, evidence gathered by the external contractor suggests that the MFA was coherent 
with  key  principles,  objectives  and  measures  taken  as  part  of  other  EU  external 
actions  towards  Kyrgyzstan.  Furthermore,  MFA  conditionalities  were  coherent  with 
those  in  other  EU  and  international  donor  support  programmes,  notably  in  the  PFM 
and  banking  areas.29  Annex  4  provides  a  comparison  of  reform  areas  driven  by  the  EU 
through  MFA,  and  the IMF  and  the  WB  through  their respective  support  programmes  in 
Kyrgyzstan.  

Overall  therefore,  the  MFA  operation  was  both,  internally  as  well  as  externally 
coherent. 

5.6 

Social Impact Analysis 

MFA  is  a  balance  of  payments  support  instrument  aiming  primarily  at  covering  external 
financing needs and at restoring the sustainability of the external position. It is not directly 
targeting specific social outcomes like other EU programmes do, such that the EU’s MFA 
to  Kyrgyzstan  had  no  explicit  conditions  on  social  outcomes.  This  presents  a  challenge 
when  assessing  the  exact  social  impact  of  the  operation.  In  light  of  this  challenge,  the 
evaluation employs a comprehensive counterfactual analysis to compare what happened to 
the  Kyrgyz  Republic’s  social  situation  during  and  after  the  MFA  operation  against  two 
alternative scenarios: of no MFA (Alternative 1) and that of no MFA nor support from the 
IMF (Alternative 2).30 

Evidence  from  the  counterfactual  analysis  suggests  that  the  social  consequences 
stemming from the absence of EU’s MFA (Alternative 1) would have been relatively 
limited, both in absolute terms and relatively when compared to those under Alternative 2. 
The shortfall of the EUR 30 million would have likely put more pressure on government 
procurement, yet significant impacts on the labour market, the cost of living and provision 

30  For  a  detailed  presentation  of  the  approach  to  the  Social  Impact  Analysis,  see  Annex  13  of  the  external 
evaluation report. 

30 

 
 
 
 
                                                 
 
 
of  key  public  services  (e.g.  health,  education,  pensions)  are  deemed  unlikely.  However, 
the  hypothetical  absence  of  both  the  EU’s  MFA  and  IMF’s  ECF  (Alternative  2) 
suggest  that  the  social  consequences  would  have  been  more  severe.  As  explained  in 
previous sections, this is not surprising since by its nature, MFA is meant to compliment 
IMF  programmes,  and  that,  it  usually  comes  in  smaller  magnitudes  compared  to  IMF 
loans.  

More broadly, the MFA supported social development through its assistance in preserving 
macro-economic stability in Kyrgyzstan. Indeed, a more aggravated balance of payments 
crisis  could  lead  to  the  depletion  of  foreign  reserves,  an  increase  in  uncertainty,  and  a 
depreciation  in  local  currency,  which  would  in  turn  have  negative  implications  on  the 
country’s standard of living, growth potential, unemployment and social benefits.  

5.7 

Debt Sustainability Analysis  

The  EU  MFA’s  contribution  to  Kyrgyzstan’s  public  debt  sustainability  was  clearly 
it 
positive,  particularly  when  combined  with 
complemented31. This was confirmed by the results of the evaluation report which used the 
IMF's Debt  Sustainability Analysis (DSA)32 framework to quantify the effect of the IMF 
and MFA on public debt sustainability for 2015-2017 (medium term) and beyond (longer 
term).  To  this  end,  the  evaluation  analyses  the  possible  paths  of  debt-burden  indicators 
under  different  scenarios,  comparing  what  happened  (the  baseline)  with  scenarios  of  no 
MFA financing (Alternative 1), and no MFA and IMF financing (Alternative 2).33  

the  IMF  assistance,  which 

The  direct  impact  on  Kyrgyzstan’s  debt  dynamics  comes  from  the  concessional 
component  of  this  MFA,  which  entails  a  grant  element  and  loans  with  favorable  terms. 
Specifically, the two loan tranches of this MFA bared long maturity (14 and 15 years) and 
very  low  interest  rates  (1.375%  and  0.750%),  this  leading  to  improvement  of  both  the 
maturity  and  interest  profile  of  the  public  debt  in  Kyrgyzstan.  The  favorable  terms  also 
suggest  that  the  Kyrgyz  Republic  may  have  benefited  from  savings  on  the  cost  of 
borrowing, and so limited the accumulation of debt to some extent. 

More broadly, the impact of EU’s MFA and the IMF assistance could be seen through their 
positive impact in supporting economic recovery, which is key to bringing debt metrics 
to a sustainable path. Indeed, over 2015 to 2017, a period when MFA funds and most of 
the  IMF’s  second  tranche  were  disbursed,  Kyrgyzstan’s  economic  performance  was 
relatively satisfactory. Real GDP grew at just over 4% annually on average, inflation stood 
at 3.2% per annum, while public debt-to-GDP ratio averaged 59.7%. 

This performance is, at least in part, due to financial assistance received from the EU and 
IMF during this period. The interventions reduced the need for further fiscal adjustments 
by the authorities (tax hikes, cuts in wages and social payments), and funded an increase in 
(or  maintaining  of)  government  spending  levels  in  a  way  that  may  have  contributed 

31 The EU’s MFA complemented an IMF rescue package of about $92.4m provided to the Kyrgyz Republic 
under the Extended Credit Facility (ECF) programme which began in April 2015. Some of the funds from the 
IMF  programme  were  disbursed  over  a  three-year  period  starting  with  about  $26.8m  in  2015,  $26.6m  in 
2016, and $26.5m in 2017, with the final tranche not disbursed. 

32 The IMF developed the DSA framework as a tool to better detect, prevent, and resolve potential payment 
crises. The framework consists of two complementary components: the analysis of the sustainability of total 
public debt and that of total external debt. For details see: https://www.imf.org/external/pubs/ft/dsa/. 

33  For  a  detailed  presentation  of  the  DSA  methodology,  see  Annex  14  of  the  external  evaluation  report.  

31 

 
 
                                                 
 
towards stabilising the economy. In addition, the analysis estimates that over 2015-2025, 
the debt-to-GDP ratio is considerably higher (+ 11 percentage points) in the no MFA and 
IMF scenario ratio, compared to the baseline case of having the MFA and IMF operations 
in place. Figure 16 illustrates.  

Figure 16: Present value of the debt-to-GDP ratio (%) (Alternative 2: no MFA and IMF) 

60

50

40

30

20

10

0

Baseline

No MFA and
IMF

2015

2017

2019

2021

2023

2025

Sources: Cambridge Econometrics calculations; IMF datasets, DSA toolkit and Country 
Reports on the Kyrgyz Republic. 

Overall, therefore, the analysis reveals that the absence of MFA and IMF assistance would 
likely  have  negatively  affected  confidence  in  the  Kyrgyz  economy  and  the  impact  of 
reforms  that  were  implemented  as  part  of  IMF  conditionalities.  Overall,  the  public  debt 
outlook in the Kyrgyz Republic following the MFA operation has been, and is expected to 
remain,  stable  in  part  because  of  support  that  the  country  received  from  international 
partners  such  as  the  EU  and  the  reinforcing  role  those  donors  played  in  driving  through 
necessary reforms associated with financial aid from donors. 

6.  Conclusions 

Hit  by  the  lingering  effects  of  the  global  economic  crisis  of  2008  and  the  interethnic 
violence of 2010, Kyrgyzstan’s economy plunged in 2010, resulting in significant balance 
of  payments  and  budgetary  financing  needs.  In  response,  the  European  Commission, 
among  other  major  international  donors,  announced  the  mobilisation  of  EUR  118 
million  of  assistance  through  various  instruments,  as  well  as  a  EUR  30  million 
package of MFA. The MFA was disbursed in full, in two instalments, over the period June 
2015 and April 2016.  

The  EU’s  MFA  programme  to  Kyrgyzstan  was  exceptional  in  nature,  as  the  Kyrgyz 
Republic  is  out  of  the  normal  geographical  scope  of  MFA.  This  MFA  operation  was 
however justified by the strength of the political and economic reform momentum in the 
country  at  the  time  and  by  its  position  in  a  region  of  strategic  economic  and  political 
importance  for  the  EU.  Indeed,  this  MFA  operation  bore  great  political  significance  at 
times of severe political and economic crisis.  

The evaluation finds that the design of the MFA operation, both in terms of financing 
envelope and focus of reforms, was relevant to Kyrgyzstan's economic challenges and 
coherent  with  EU  priorities.  MFA  disbursements  accounted  for  around  0.3%  of 
Kyrgyzstan’s GDP in  both  2015 and 2016, and though  delayed, were  still relevant given 
the economic difficulties that prevailed in Kyrgyzstan at the time.  

32 

 
 
 
 
The  EU’s  added  value  was  most  apparent  in,  firstly,  reinforcing  the  promotion  of 
structural  reforms  in  several  priority  areas,  including  public  finance  management, 
financial sector, trade policy and investment, and business environment. Indeed, evidence 
suggests  that  the  MFA  encouraged  the  implementation  of  specific,  short-term,  measures 
that  may  have  otherwise  been  overlooked  /  further  delayed  by  national  authorities. 
Additionally, MFA reforms were closely aligned to and coherent with those in other EU 
support  programmes  (including  budget  support  programmes)  and  those  set  by  other 
important  donors,  including  the  IMF  and  the  WB.  This  reinforced  the  rationale  for 
adjustment  measures  and  provided  local  authorities  with  an  impetus  to  reform  swiftly  in 
targeted sectors. 

More  broadly,  the  evaluation  finds  that  MFA  was  effective  in  contributing  to  the 
stabilisation  of  the  Kyrgyz  economy,  particularly  when  combined  with  the  IMF’s 
support  programme,  which  it  complemented.  Due  to  its  grant  component  and  loans 
bearing long maturity (14 and 15 years) and very low interest rates (1.375% and 0.750%),  
MFA  contributed  to  improving  Kyrgyzstan’s  public  debt  sustainability.  The  favorable 
terms also suggest that the Kyrgyz Republic may have benefited from savings on the cost 
of borrowing, and so limited the accumulation of debt to some extent. More broadly, the 
impact of EU’s MFA and the IMF assistance could be seen through their positive impact in 
supporting economic recovery, which is key to bringing debt metrics to a sustainable path. 

Beyond  contributing  to  economic  stabilisation,  the  EU  MFA  served  important 
political objectives in the Kyrgyzstan. The actual disbursements (coincidentally) came at 
a politically important moment ahead of parliamentary elections and thus served as a signal 
of  EU  support  to  democratic  reforms  in  Central  Asia,  consistent  with  the  EU  policy 
towards  the  region.  Furthermore,  though  the  EU  MFA  did  not  specifically  target  social 
reform,  interviews  conducted  with  EU  and  Kyrgyz  stakeholders  confirm  that  the  MFA 
provided  the  EU  with  (added)  leverage  to  prevent  the  enactment  of  contested 
legislations in 2015 and 2016, notably the ‘anti-LGBTI’ and ‘foreign agents’. Indeed, 
the  perceived  high  risk  of  losing  the  MFA  financial  envelope  constituted  a  critical 
determining  factor  in  the  Kyrgyz  government’s  decision  to  not  pursue  the  two  laws  for 
adoption in parliament. 

Finally, the evaluation confirms that the MFA operation was implemented efficiently 
and  in  close  coordination  with  the  Kyrgyz’s  authorities,  the  IMF  and  the  World 
Bank.  This  enabled  the  EU  to  draw  on  the  expertise  of  partner  institutions.  The  Kyrgyz 
authorities were swift and effective in the implementation of the conditionality, fulfilling 
all conditions, without the need for waivers. 

Overall therefore, the evaluation finds evidence that the EU MFA to Kyrgyzstan was 
relevant,  coherent,  effective  and  efficiently  implemented.  Nevertheless,  the  operation 
was  characterised  by  an  exceptionally  long  timetable  throughout  the  process,  which  may 
have  hampered  the  EU  added  value  and  the  visibility  surrounding  the  operation.  Indeed, 
the review of the visibility of the operation and the EU communication activity indicates 
scope  for  improvement.  Since  then,  with  the  aim  to  improve  the  visibility  and  public 
understanding of MFA programmes, the Commission started in mid-2014 to publish on the 
web  site  of  DG  ECFIN  the  Memorandum  of  Understanding  that  lays  down  the  reform 
measure related to the operations. 

in 
Nevertheless, 
disbursement, the MFA was still relevant in 2015-2016 as they coincided with important 

the  external  evaluation  confirms 

that  despite 

the  delays 

33 

 
 
debt repayment obligations and with the time Kyrgyzstan faced difficulties as the Russian 
economic crisis began unfolding. 

A  number  of  the  conclusions  and  limitations  identified  will  require  further  consideration 
and may benefit from cross-comparison with other recently completed MFA operations. A 
meta-evaluation  is  planned  for  2020  and  it  will  explore  these  points  in  more  detail.  The 
meta-evaluation  will  provide  a  synthesis  of  the  results  of  the  evaluation  studies  of  MFA 
operations carried out in the last ten years and will consider the reliability and relevance of 
the  methodology,  process,  outputs,  and  outcomes  of  these  evaluations.  In  addition  the 
exercise will assess the timeline of MFA operations and potential linkages to added-value 
and operational visibility. 

34 

 
 
 
 
 
 
 
 
 
Annex 1: Procedural information 

1. Organisation and Timing  

This  evaluation  assesses  the  Macro-financial  assistance  (MFA)  programme  for  Kyrgyz 
Republic of EUR 30 million, which was launched in October 2013 and completed in April 
2016. The assessment is in line with the Financial Regulation (article 30 point 4) and the 
relevant  MFA  Decision  that  call  for  a  submission  of  an  ex  post  evaluation  report  to  the 
European Parliament and the Council.34   

The  objective  of  the  evaluation  is  to  draw  lessons  with  respect  to  the  EU’s  financial 
assistance,  in  particular  the  design  and  implementation  of  the  programmes  and  the  way 
they contributed to achieving macroeconomic stabilisation and fostering structural reforms. 
Apart  from  identifying  areas  of  improvement  for  similar  on-going  or  future  possible 
interventions, the evaluation also aims at ensuring better transparency and accountability of 
the Commission's activities. The evaluation looks at various aspects of this particular EU 
intervention  such  as  relevance  and  efficiency,  effectiveness,  coherence  and  EU  value 
added.  In  addition,  the  evaluation  explores  the  social  impact  of  the  MFA  operations  and 
their effect on Kyrgyzstan’s public debt sustainability.   

The work of the external consultant was complemented by internal analysis. The indicative 
roadmap  for  the  ex  post  evaluation  of  MFA  for  Kyrgyz  Republic  was  published  in 
December 2017. In the context of the framework contract for the provision of evaluation 
services  related  to  MFA  programmes,  the  Commission  awarded  on  30  January  2018  the 
specific  contract  to  Consortium  ICF  (ICF  Consulting  Services  Ltd.  and  Cambridge 
Econometrics Ltd.) 

The lead DG to carry out and manage this evaluation has been the Directorate General for 
Economic  and  Financial  Affairs  (DG  ECFIN).  DG  ECFIN  chaired  the  Inter-service 
Steering  Group  (ISG)  that  was  set  up  to  manage  the  evaluation.  Apart  from  DG  ECFIN, 
the ISG comprised of representatives of other Commission services (namely the Secretariat 
General and the Directorate-General for International Cooperation and Development – DG 
DEVCO) as well as the European External Action Service (EEAS) and the EU Delegation 
in Kyrgyzstan.    

A  kick-off  meeting  at  which  the  ISG  and  the  external  consultant  discussed  the  foreseen 
deliverables  and  the  evaluation  techniques  in  depth,  took  place  in  March  2018.  It  was 
followed by meetings on the inception and interim reports in May 2018 and in July 2018, 
respectively.  Overall,  the  ISG  met  three  times.  In  addition,  ISG  members  were 
continuously informed and consulted, through e-mails and phone calls, during the various 
stages of the evaluation.  

2. Consultation of stakeholders 

The  consultation  strategy  included  a  range  of  appropriate  tools  to  reach  key,  relevant 
stakeholders  in  order  to  collect  pertinent  evidence  on  the  implementation  of  the  MFA  in 
Kyrgyzstan.  In  turn,  this  did  not  include  an  open  public  consultation,  but  was  rather 
targeted to specialists - people who have either been closely involved in the development 
and/or the implementation of the MFA-I operation or persons with expert knowledge in the 

34 Decision No 1025/2013/EU of the European Parliament and of the Council of 22 October 2013 providing 
macro-financial assistance to the Kyrgyz Republic 

35 

 
 
 
                                                 
areas related to the objectives of the MFA operation. In addition, an indicative evaluation 
roadmap was published in December 2017 to seek wider feedback35. Finally, the results of 
this  evaluation  will,  in  due  course,  feed  into  a  wider  meta-evaluation  of  EU  MFA 
operations, which will include an open public consultation.  

3. Evidence, sources and quality  

The  evidence  used  for  the  ex-post  evaluation  of  MFA  for  Kyrgyz  Republic  included  a 
variety  of  documents,  official  data  sources,  media  outlets  as  well  as  interviews  and 
surveys.  Approximately  60  documents  were  reviewed  and  analysed.  These  could  be 
grouped  in  four  main  types  -  (i)  documents  directly  related  to  the  design  and 
implementation  of  the  MFA  programmes,  (ii)  EU  policy-related  documents,  (iii) 
documents  published  by  the  Kyrgyz  authorities,  and  (iv)  documents  prepared  by  various 
international financial institutions and economic researchers. In addition, a variety of data 
sources was used and analysed such as Kyrgyz authorities (including Ministry of Finance 
and  Central  Bank  of  Kyrgyzstan),  the  World  Bank,  the  World  Economic  Outlook  of  the 
IMF, and the EuroAsian Development Bank among others.   

Overall, the quality of the collected evidence (data, documentation, interviews and survey 
results)  for  this  evaluation  can  be  assessed  as  very  good,  demonstrating  a  satisfactory 
degree  of  confidence  regarding  the  various  findings  of  this  evaluation.  The  quantitative 
fieldwork was based on reliable statistical data, while purposeful sampling was used for the 
interviews,  the  Delphi  survey  and  the  focus  group  discussion.  To  collect  a  broad,  multi-
dimensional  and  triangulated  picture  of  the  economic,  financial  and  structural  issues 
surrounding the programme, a wide range of civil society organisations was also involved. 

4. Limitation and Challenges 

Aside  from  the  limitations  and  challenges  detailed  in  Section  4  of  this  SWD,  the  main 
challenge  surrounding  this  exercise  appeared  to  be  the  timeline  of  the  evaluation  as 
initially  envisaged.  Given  the  number,  complexity  and  depth  of  the  data  treatment,  the 
organisation of several missions, and the availability of the persons to be interviewed, the 
time line of the evaluation proved somewhat tight. Therefore, to address these pressures an 
extension of the evaluation time line was deemed necessary.  

35 Evaluation roadmap available at: https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-
6341347_en 

36 

 
 
 
 
 
 
 
 
 
 
                                                 
Annex 2: References 

Bibliography 

OECD  (2010),  Kyrgyz  Republic,  Aid  Effectiveness  2011:  Progress  in  Implementing  the 
Paris Declaration 

Ministry  of  Finance  of  the  Kyrgyz  Republic  (2010),  Reporting  document,  information 
letter 

European  Commission  DG  ECFIN  (2011),  Ex-Ante  evaluation  statement  on  EU  macro-
financial assistance to the Kyrgyz Republic, Staff Working Paper 

Council of the European Union (2011), Possible Macro-Financial Assistance to the Kyrgyz 
Republic  Further  Information,  Information  note  for  the  Financial  Counsellors  Working 
Party 

European  Commission  DG  ECFIN  (2011),  Proposal  for  a  decision  of  the  European 
Parliament  and  of  the  Council  providing  macro-financial  assistance  to  the  Kyrgyz 
Republic. COM(2011) 925 final 

European  Commission  (2012),  Operational  Assessment  of  the  financial  circuits  and 
procedures in the Kyrgyz Republic, Report (July 2012) 

European  Commission  (2012),  Second  instalment  review,  Policy  Support  Programme, 
Social  Protection  and  Public  Finance  Management,  Aide  Memoire  –  Review  Mission 
(May 2012) 

European Commission (2013), Decision of the European Parliament and the Council of 22 
October  2013  providing  macro-financial  assistance  to  the  Kyrgyz  Republic,  DECISION 
No 1025/2013/EU 

European  Commission  DG  ECFIN  (2014),  Macro-Financial  Assistance  to  the  Kyrgyz 
Republic, MS Committee meeting of 26 June 2014, meeting minutes (June 2014) 

European  Commission  DG  ECFIN  (2014),  Memorandum  of  understanding  between  the 
European  Union  and  the  Kyrgyz  Republic  on  the  Macro  Financial  Assistance  for  the 
Kyrgyz Republic, Grant and Loan from the EU of up to EUR 30 million, Memorandum of 
Understanding (July 2014) 

European  Parliament  (2015),  Joint  motion  for  a  resolution  on  Kyrgyzstan  homosexual 
propaganda bill (January 2015) 

European Commission (2015), European Parliament urges Kyrgyzstan to drop anti-LGBTI 
bill, press release (January 2015) 

European  Commission  DG  ECFIN  (2015),  Macro-Financial  Assistance  the  Kyrgyz 
Republic: Disbursement of the first tranche, Information note to the European Parliament 
and to the Council (May 2015) 

European Commission DG ECFIN (2015), Commission Decision on the borrowing of the 
EU for the macro-financial assistance loan to the Kyrgyz Republic, C(2015) 3582 final 

37 

 
 
 
European Commission DG ECFIN (2015), Commission Decision on the release by the EU 
of Macro Financial assistance to the Kyrgyz Republic, C(2015) 3581 final 

European  Commission  DG  ECFIN  (2016),  Macro-Financial  Assistance  the  Kyrgyz 
Republic:  Disbursement  of  the  second  tranche,  Information  note  to  the  European 
Parliament and to the Council (May 2015) 

ECORYS  (2017),  Ex-post  evaluation  of  Macro-Financial  Assistance  to  Jordan,  Report 
(October 2017) 

EC Mission reports 

European  Commission  (2011),  Discussion  on  possible  macro-financial  assistance  for 
Kyrgyzstan. Staff Report on mission to the Kyrgyz Republic (23-27 May 2011, Bishkek) 

European Commission (2012), Mission report to the Kyrgyz Republic in the framework of 
the MFA Operational Assessment, Staff Report (11-15 June 2012) 

European Commission (2013), IMF conference on Caucasus and Central Asia 19-21 May 
2013,  and  discussions  on  the  conditionality  for  the  macro-financial  assistance  operation 
with  the  Kyrgyz  Republic.  Staff  Report  on  mission  to  the  Kyrgyz  Republic  (21-24  May 
2013, Bishkek). 

European  Commission  (2013),  Discussions  on  the  legal  documents  associated  with  the 
macro-financial assistance operation with the Kyrgyz Republic. Staff Report on mission to 
the Kyrgyz Republic (8-11 October 2013, Bishkek). 

European  Commission  (2013),  Report  on  mission  to  the  Kyrgyz  Republic  to  finalize  an 
agreement on EUR 30 MM macro-financial assistance operation. Staff Report on mission 
to the Kyrgyz Republic (8-11 October 2013, Bishkek). 

European Commission (2016), Report on the review mission to Bishkek, Kyrgyzstan, 17-19 
November 2015 related to the disbursement of the 2nd tranche of the MFA. Staff Report on 
mission to the Kyrgyz Republic (17-19 November 2016, Bishkek) 

IMF mission reviews 

International  Monetary  Fund  (2011),  Public  Finance  Management  Reforms,  Report 
(August 2011) 

International Monetary Fund (2011), Kyrgyz Republic: First Review Under the Three-Year 
Arrangement  Under  the  Extended  Credit  Facility  and  Request  for  Modification  of 
Performance Criteria, Staff Report (December 2011) 

International  Monetary  Fund  (2014),  Kyrgyz  Republic:  Sixth  Review  under  Three  Year 
Agreement under ECF. 

International  Monetary  Fund  (2015),  Staff  Report  for  the  2015  Article  IV  consultation, 
Staff Report (November 2015) 

International  Monetary  Fund  (2016),  Kyrgyz  Republic:  Second  Review  Under  the  Three-
Year  Arrangement  Under  the  Extended  Credit  Facility  and  Request  for  Modification  of 
Performance Criteria, Staff Report (June 2016) 

38 

 
 
International  Monetary  Fund  (2017),  Kyrgyz  Republic:  Third  Review  Under  the  Three-
Year  Arrangement  Under  the  Extended  Credit  Facility  and  Request  for  Modification  of 
Performance Criteria, Staff Report (June 2017) 

International Monetary Fund (2018), Kyrgyz Republic: Fourth and Fifth Review Under the 
Three-Year Arrangement Under the Extended Credit Facility and Request for Modification 
of Performance Criteria, Staff Report (February 2018) 

MFA annual reports and SWD 

European  Commission  (2012),  Report  from  the  Commission  to  the  council  and  the 
European  Parliament  on  the  implementation  of  macro-financial  assistance  to  third 
countries in 2011, Staff Working Document (June 2012) 

European  Commission  (2012),  Background  analysis  per  beneficiary,  accompanying  the 
document: Report from the Commission to the council and the European Parliament on the 
implementation  of  macro-financial  assistance  to  third  countries  in  2011,  Staff  Working 
Document (June 2012) 

European  Commission  (2013),  Report  from  the  Commission  to  the  council  and  the 
European  Parliament  on  the  implementation  of  macro-financial  assistance  to  third 
countries in 2012, Staff Working Document (June 2013) 

European  Commission  (2013),  Background  analysis  per  beneficiary,  accompanying  the 
document: Report from the Commission to the council and the European Parliament on the 
implementation  of  macro-financial  assistance  to  third  countries  in  2012,  Staff  Working 
Document (June 2013) 

European  Commission  (2014),  Report  from  the  Commission  to  the  council  and  the 
European  Parliament  on  the  implementation  of  macro-financial  assistance  to  third 
countries in 2013, Staff Working Document (June 2014) 

European  Commission  (2014),  Background  analysis  per  beneficiary,  accompanying  the 
document: Report from the Commission to the council and the European Parliament on the 
implementation  of  macro-financial  assistance  to  third  countries  in  2013,  Staff  Working 
Document (June 2014) 

European  Commission  (2015),  Report  from  the  Commission  to  the  council  and  the 
European  Parliament  on  the  implementation  of  macro-financial  assistance  to  third 
countries in 2014, Staff Working Document (June 2015) 

European  Commission  (2015),  Background  analysis  per  beneficiary,  accompanying  the 
document: Report from the Commission to the council and the European Parliament on the 
implementation  of  macro-financial  assistance  to  third  countries  in  2014,  Staff  Working 
Document (June 2015) 

European  Commission  (2016),  Report  from  the  Commission  to  the  council  and  the 
European  Parliament  on  the  implementation  of  macro-financial  assistance  to  third 
countries in 2015, Staff Working Document (June 2016) 

European  Commission  (2016),  Background  analysis  per  beneficiary,  accompanying  the 
document: Report from the Commission to the council and the European Parliament on the 
implementation  of  macro-financial  assistance  to  third  countries  in  2015,  Staff  Working 
Document (June 2016) 

39 

 
 
European  Commission  (2017),  Report  from  the  Commission  to  the  council  and  the 
European  Parliament  on  the  implementation  of  macro-financial  assistance  to  third 
countries in 2016, Staff Working Document (June 2017) 

European  Commission  (2017),  Background  analysis  per  beneficiary,  accompanying  the 
document: Report from the Commission to the council and the European Parliament on the 
implementation  of  macro-financial  assistance  to  third  countries  in  2016,  Staff  Working 
Document (June 2017) 

Key data sources / statistics 

Centre  for  International  Development  of  Harvard  University,  Atlas  of  Economic 
Complexity. Available at: http://atlas.cid.harvard.edu/   

(2018).  World 

IMF, 
https://www.imf.org/en/Publications/WEO/Issues/2018/07/02/world-economic-outlook-
update-july-2018  

April/July. 

Economic 

Available 

Outlook 

World Bank (2018). Available at: https://data.worldbank.org/  

Various statistics from the Ministry of Finance and Economy 

Various statistics from the CIA World Factbook 

Various statistics from the National Statistical Committee of the Kyrgyz Republic 

Various statistics from the National Bank of the Kyrgyz Republic 

Various IMF datasets, and Country Reports on the Kyrgyz Republic 

at: 

40 

 
 
 
 
Annex 3: Discussion of validity and reliability of the evaluation findings 

In  the  Commission’s  and  the  external  evaluator’s  judgement,  the  overall  reliability  and 
validity  of  the  evaluation  is  strong.  There  are  multiple  lines  of  evidence  and  inquiry 
contributing  to  answering  each  evaluation  question,  mitigating  the  limitations  associated 
with individual research activities. Moreover, a series of measures were undertaken by the 
study team to ensure the reliability and validity of the overall findings of this evaluation as 
indicated in the table below.  

Overview of the main elements underpinning reliability and validity of findings  

Criteria 
quality 

for 

judging 

Measures undertaken for improving quality 

Judgement 

Credibility (internal 
validity) - the extent to 
which the findings are 
plausible, believable and 
trustworthy; and thus can 
be defended when 
challenged. 

Transferability (external 
validity) – the degree to 
which findings can be 
transferred to other 
contexts by the readers. 
This means that the 
results are generalizable 
and can be applied to 
other similar settings, 
populations, situations 
and so forth 

Reliability 
(dependability) - the 
consistency with which 
the results could be 
repeated and result in 
similar finding 

Confirmability 
(objectivity) - the degree 
to which the results could 
be confirmed or 
corroborated by others 

Triangulation  –  combining  and  cross-checking  theory 
and  evidence  generated  by  multiple  perspectives, 
theories, methods, and data sources 

Strong 

Respondent validation- sharing interview write-ups with 
interviewees to ensure accuracy and completeness 

Hypothesis exploration: multiple hypotheses were tested 
to identify the best, most probable explanation 

the  MFA 
Detailed  description  of 
operation and methodology to assist the reader in being 
able 
them 
appropriately 

the  findings  and  apply 

the  context  of 

to  generalise 

Medium 

Triangulation- evidence compiled from different sources 
was corroborated and cross-validated 

Strong 

Thorough record keeping, ensuring a clear decision trail 
and transparency in data interpretation 

Information  synthesis:  going  beyond  simply  collecting, 
listing  and  describing  distinct  data  elements  in  the 
interpretive process 

Stance  analysis:  taking  account  key  informants’  and 
stakeholders’  backgrounds 
their 
perspective  might  have  biased  the  information  they 
provided 

to  assess  how 

Acknowledging  biases 
sampling  and  critical 
in 
reflection  of  methods,  ensuring  sufficient  depth  and 
relevance of data collection and analysis 

Explanation critique - the interpretive chain of reasoning 
and inferences drawn have been subject to ‘peer’ review 
and critical challenge by stakeholders 

Strong 

41 

 
 
 
 
Annex 4: Comparison of MFA, IMF and World Bank conditionalities 

Areas of focus 

PFM - Medium-Term Budget Framework 

PFM - PEFA 

PFM  -  Accounting,  reporting  /  Treasury  Management  Information  System  / 
Financial Management Information System 

PFM - External auditing 

PFM - Internal auditing 

PFM - Budget consolidation 

PFM - Budget law 

PFM - Debt management 

PFM - Public Investment Management 

PFM - Public Procurement 

PFM - Structure of the MoF 

PFM – Budget discipline / transparency 

Banking sector – Banking Code / Law 

Banking sector - AML 

Banking sector - Crisis Management and Bank Resolution 

Banking sector - De-dollarisation of the financial sector 

Banking sector - Level playing field across banks 

Banking sector - Macroprudential regulation 

Banking sector - Supervision 

MFA 

IMF 2011 

IMF 2015 

WB DPO I   WB DPO II  

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

42 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Areas of focus 

MFA 

IMF 2011 

IMF 2015 

WB DPO I   WB DPO II  

Banking sector - Small and medium enterprise access to finance and leasing 

Banking sector – Reinforcement of the NBKR’s supervisory function  

Banking sector – Strengthening of the Deposit Protection System 

Banking sector - Access to finance  

Trade policy - application of WTO commitments 

Investment and business environment – startup and operations 

Investment and business environment – Reduction of red tape 

Investment and business environment – Deposit protection arrangements 

Investment and business environment – Business inspections 

Investment and business environment – Increased accountability of 

V 

V 

executive directors 

Energy sector 

Fiscal policy - Expenditure management 

Public administration reform 

Social protection 

VAT / Tax policy / Tax administration reform/ Customs valuation 

V 

Governance / anti-corruption 

Judicial reform 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

V 

43 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 5: Evaluation Framework 

Judgement criteria 

Quantitative analysis 

Qualitative analysis 

Sources of information 

Evaluation criteria: ‘Relevance’  

Evaluation Question 1: To what extent was the MFA operation design (including adequateness of financing envelope, focus of 
conditionality) appropriate in relation to the outputs to be produced and objectives to be achieved? 

  The size of the financial 

assistance was adequate in 
relation to Kyrgyzstan’s 
financing needs 
  Form of support was 
appropriate given 
Kyrgyzstan’s debt position 
and income status 

  MFA conditionalities were 

consistent with and 
relevant to Kyrgyzstan’s 
needs and EU’s and other 
donors’ programmes and 
realistic given the short-
term nature of the 
instrument 

  The MFA package was 
generally regarded as 
relevant to Kyrgyzstan’s 
needs by stakeholders, 
local economists, media 
etc. 

  Financing needs in 

  Degree of consensus among 

 

Documentary analysis: 

2012-13 and how these 
were met 

  Analysis of financing 

needs in 2015- 2016 (as 
done by IMF) and the 
role of MFA in meeting 
these needs 

  Comparison between 
projected and actual 
financing needs – 
reasons for deviations 
and relevance and 
appropriateness of MFA 
in light of any changes 

  Analysis of how 

Kyrgyzstan meets 
criteria defining 
eligibility to grants and 
of EU budgetary 
constraints 

  Debt sustainability 

key stakeholders/ key 
informants regarding the 
relevance and importance of 
the MFA (in absolute and 
relative terms) 

-  Ex-ante evaluation of MFA to 

Kyrgyzstan 

-  Memorandum of Understanding 
(MoU) and Loan and Grant 
Agreements 

  Stakeholders and local 

-  Reports and supporting 

economists’ assessment of 
the use of a mix of loan and 
grant and focus of the 
conditionality 

  Examination of whether the 

focus of MFA 
conditionality was relevant 
and appropriate in Kyrgyz 
context bearing also in mind 
the characteristics of the 
MFA instrument 

  Analysis of synergies with 
the IMF ECF programme / 
other EU programmes 

documentation submitted by the 
Kyrgyz authorities to the European 
Commission on the fulfilment of 
the structural reform criteria;  

-  Commission’s assessment of 

compliance with conditionality 
requirements (i.e. after mission 
reviews) 
-  IMF reviews 
-  Other reports including on the 

progress of PFM reforms 
accompanied with performance 
indicators/metrics (e.g. 2015 PEFA 
report for Kyrgyzstan) 

  Semi-structured interviews: 

-  EC officials: DG ECFIN, DG DEVCO 

44 

 
 
 
Judgement criteria 

Quantitative analysis 

Qualitative analysis 

Sources of information 

analysis 

-  EEAS 
-  Key representatives of Member 

States 

-  IMF/ WB officials; 
-  Kyrgyz authorities including also 
Ministry of Finance and Central 
Bank of Kyrgyzstan 

-  EU Delegation in Kyrgyzstan 
-  Civil society representatives 

  Focus group with other development 

partners 

Evaluation criteria: ‘Effectiveness’  

Evaluation Question 2: To what extent have the objectives of the MFA operation been achieved? 

  Macroeconomic impact 

-  There has been an 
improvement in 
Kyrgyzstan’s 
macroeconomic 
situation including, 
external financial 
sustainability 
-  The role and 

contribution of MFA can 
be identified 

-  MFA had a positive 

social impact 

-  The evidence suggests 

  Analysis of trends in key 
indicators (National 
accounts, Balance of 
payments statistics, 
Government finance 
statistics, Monetary 
statistics, External 
sustainability before, 
during and after MFA 

  Analysis of data on 
lending conditions 
available for Kyrgyzstan 
(focusing on financing 

  Counterfactual analysis  
  Stakeholders and local 

economists’ views on the 
specific contribution of 
MFA to short-term 
macroeconomic 
stabilisation of Kyrgyzstan 

  Document and data review 

-  Macroeconomic data sourced from 
IMF/WB and national sources; 

-  MFA documentation 
-  IMF reviews and country reports; 
-  Credit rating agency reports (i.e. 

Moody’s) 

  Stakeholders and local 

-  Academic and grey literature on the 

economists’ assessment of 
the contribution of MFA 
including structural reforms; 

  Assessment of alternatives 

available to fill the 
financing gap if MFA (and 

Kyrgyz economy; 

-  Data on public borrowing (scale/ 
maturity/ costs) and prevailing 
market conditions at the time of 
MFA/IMF programmes 

45 

 
 
 
Judgement criteria 

Quantitative analysis 

Qualitative analysis 

Sources of information 

  Semi-structured interviews 

-  EC officials: DG ECFIN 
-  IMF/ WB officials 
-  Kyrgyz authorities, in particular, 

Ministry of Finance 

-  EU Delegation in Ukraine 

  Inputs from local experts 

-  Focus Group with key bilateral/ 

multilateral donors 

that Kyrgyzstan would 
have been worst off in 
absence of the MFA 

  Structural reforms 

available from bilateral / 
multilateral donors and 
to some extent from 
national capital markets) 

IMF) resources had not 
been provided 

  Stakeholders’ perceptions 

on other impacts 

  Debt sustainability 

analysis 

  Social impact analysis – 

evolution of key 
indicators relating to 
unemployment, poverty 
etc. 

-  There is evidence of 
reform e.g. INTOSAI 
standards applied at 
Chamber of Accounts 
-  There is evidence to 
suggest that MFA 
accelerated, reinforced 
or promoted reform in 
certain areas e.g.  the 
financial sector 
-  There is general 

consensus among 
stakeholders that the 
MFA contributed 
positively to 
macroeconomic 
stabilisation and 
Kyrgyzstan’s reform 
effort 

Evaluation criteria: ‘Efficiency’ 

Evaluation Question 3: Was the disbursement of the financial assistance appropriate in the context of the prevailing economic and financial 
conditions in the beneficiary country? 

Evaluation Question 4: In what way has the design of the MFA assistance conditioned the performance of the operation in respect to its cost 
and its objectives? 

46 

 
 
Judgement criteria 

Quantitative analysis 

Qualitative analysis 

Sources of information 

  MFA disbursements were 
timely given Kyrgyzstan’s 
financing needs 

  There were favourable 
entry conditions for the 
MFA operation e.g. 
political commitment; 
public buy-in, capacity to 
implement reform 
  The design of the MFA 

operation was flexible and 
it adjusted to changes in 
context and/or feedback 
mechanisms 

  There was effective 

dialogue between the 
European Commission and 
Kyrgyz authorities 
  There was effective 

monitoring of the MFA 

  Timing of disbursements 

  Analysis of the timing of 

  Document and data review: 

in relation to key 
macroeconomic 
developments and 
Kyrgyzstan’s financing 
needs 

disbursements of both MFA 
and IMF and factors 
affecting disbursements 
  Time taken between Kyrgyz 
authorities request for MFA 
assistance and approval/ 
disbursement of MFA 

- 
- 

MFA documentation 
IMF/ WB documentation 

  Semi-structured interviews 

- 

- 
- 
- 
- 

EC officials: DG ECFIN, DG 
DEVCO 
EEAS 
IMF/ WB officials 
Kyrgyz authorities 
EU Delegation 

  Not applicable 

  The extent of liaison 

  Document and data review: 

-  Macroeconomic data sourced from 

IMF and national sources 

-  MFA documentation 

  Semi-structured interviews: 

-  EC officials: DG ECFIN, DG DEVCO 
-  EEAS 
-  IMF/ WB officials 
-  Kyrgyz authorities 
-  EU Delegation 

  Focus group 

between the European 
Commission and Kyrgyz 
authorities; and between the 
European Commission and 
IMF/ other donors 
  The communication 

channels used and media 
treatment received 

  Whether there was effective 
monitoring of the MFA 
operation 

  Stakeholders’ feedback on 
what could have been done 
differently with the benefit 
of hindsight  

  Analysis of the choice of 
conditionality – see also 

47 

 
 
Judgement criteria 

Quantitative analysis 

Qualitative analysis 

Sources of information 

operation 

  Donors were well 

coordinated 

relevance 

  Analysis of synergies with 
the IMF ECF programme / 
other EU programmes – see 
also relevance 

  Identification of good 

practice / lesson learned 
from the design and 
implementation of MFA 
operation in Kyrgyzstan 

Evaluation criteria: ‘EU added-value’ 

Evaluation Question 5: What was the rationale for an intervention at EU level and to what extent did the MFA operation add value 
compared to other interventions by other international donors? 

  Financial added value over 
intervention at MS level 

  Evidence that MFA 

reinforced the 
Government’s commitment 
to socio-economic reform 

  There is demonstrable 

evidence of signalling and 
confidence building effect 
of MFA operation – 
building investor and 
private sector confidence 

  EU had a discernible 

  Trends in confidence 
indicators and proxy 
indicators of confidence 
such as interest rates for 
T-bills and longer-term 
bonds denominated in 
local currency and key 
indicators of the foreign 
exchange market 

  Qualitative assessment of 
links between wider 
fluctuations in confidence 
indicators and EU assistance 
  Mapping of conditionalities 

(see also relevance) 

  Stakeholders’ views on the 
role and influence of EU in 
the design and application of 
support package 

  Document and data review: 

-  Macroeconomic data sourced from 

IMF and national sources; 

-  MFA documentation; 
-  IMF reviews and country reports; 
-  Academic and grey literature; 
-  Credit Rating Agencies reports 
-  Financial markets data 

  Semi-structured interviews: 

-  EC officials: DG ECFIN, DG DEVCO; 
-  IMF/ WB officials; 
-  Other key bilateral/ multilateral 

donors; 

48 

 
 
 
 
 
 
Judgement criteria 

Quantitative analysis 

Qualitative analysis 

Sources of information 

influence on the design and 
application of 
conditionalities 

  There is clear financial 

added value of EU support 
– national authorities 
would have struggled to 
meet their financing needs 
in absence of the EU MFA 

Evaluation criteria: ‘Coherence’ 

-  Kyrgz authorities; 
-  EU Delegation in Kyrgyzstan; 
-  Civil society organisations  

  Focus group 

-  Insights from study experts 

Evaluation Question 6: To what extent was the MFA operation in line with key principles, objectives and measures taken in other EU 
external actions towards the Kyrgyz Republic? 

  Not applicable 

  The MFA was fully in line 
with EU objectives and 
reinforced EU action 
deployed via other 
instruments 

  Stakeholders assessment of 
the coherence of the MFA 
with other EU external 
actions 

  Qualitative assessment of 

the adequacy of the 
conditionality, potential 
synergies/ overlapping with 
other EU instruments 

  Document and data review: 

-  MFA documentation including ex-

ante evaluation of MFA to 
Kyrgyzstan; 

-  Identification of relevant 

programmes/ actions and review of 
their documentation; 

  Semi-structured interviews: 

-  EC officials: DG ECFIN, DG DEVCO; 
-  EEAS 
-  EU Delegation in Kyrgyzstan; 
-  Kyrgyz authorities 
-  Other interviews including civil 

society organisations. 

49 

 
 
 
 
 
Judgement criteria 

Quantitative analysis 

Qualitative analysis 

Sources of information 

  Focus group 

50 

 
 
Annex 6: Synopsis Report  

Introduction  

Stakeholder  consultation  is  a  key  element  in  the  ex-post  evaluation  of  MFA  to  the  Kyrgyz 
Republic and Commission minimum standards have been met, as a comprehensive range of 
key stakeholders have been reached as part of the consultation.  

The  implementation  of  the  stakeholder  consultation  strategy  followed  the  publication  of  the 
ex-post evaluation roadmap of MFA to the Kyrgyz Republic in December 2017. The strategy 
was  developed  with  the  overall  objective  to  capture  as  much  information  as  possible  with 
regard to the MFA programme, in addition to information collected via desk research and data 
analysis.  The  consultation  focused  on  extracting  recollections  from  the  time  when  the 
operations were designed and implemented – See Table A6. The consultation also focused on 
collecting views on the period after the MFA was ended to assess its impact on achieving its 
key objectives and drawing lessons for ongoing and future similar EU interventions.   

Table A6: General Timeline of MFA operation   

This  consultation  strategy  described  below  sets  out  the  objectives  of  the  consultation,  maps 
key  stakeholders,  presents  the  consultation  methods  and  tools  which  are  used  and 
demonstrates how the stakeholder consultation fits in the evaluation framework.   

The  diagram  below  presents  a  timeframe  for  the  implementation  of  this  consultation  during 
2018 and 2019. The following section elaborates. 

February 
2018 
• Contract 
sign 

March 
2018 
• Kick-off 
meeting 

Apr/May 
2018 
• Inception 
report + 
Meeting  

July 2018 
• Interim 
report + 
Meeting 

October 
2018 
• Draft final 
report  

January 
2019 
• Stakeholder 
Workshop 

April 
2019 
• Final 
Report 

51 

 
 
 
 
 
 
 
 
Objective setting  

The  objective  of  stakeholder  consultation  was  to  collect  as  much  valuable  and  relevant 
information as possible from the key stakeholders involved to construct an ex-post assessment 
of the design, implementation and impact of the MFA operation. Stakeholders were consulted 
on the following key aspects:  

  Relevance  of  the  MFA  operation:  the  relevance  of  the  objectives,  the  financial 
envelop and the conditionality, both at the time of designing the MFA operation and 
currently with the benefit of hindsight;  

  Effectiveness of the MFA operation: the direct results of the MFA operation, i.e. the 
results of the MFA operation on macroeconomic level and the results in the area of 
the structural reforms;  

  Efficiency  of  the  MFA  operation:  the  design  and  process  of  the  MFA  in  terms  of 

value-for-money;  

  EU-added  value  of  the  MFA  operation:  the  added  value  of  the  operation  when 

considering other possible scenarios and alternatives;  

  Coherence  of  the  MFA  operation:  alignment  with  other  support  initiatives 

implemented at the time of the MFA;  

  Social impact: the more indirect impact of the MFA operation in the context of social 
development  in  Kyrgyzstan,  in  particular  alleviation  of  the  impact  of  the  refugee 
crisis;  

  Debt sustainability: the longer-term result of the MFA I in terms of implications for 

Kyrgyzstan’s fiscal sustainability. 

Stakeholder mapping 

Consultation was targeted to specialists – either people who have either been closely involved 
in the development and/or the implementation of the MFA-I operation or persons with expert 
knowledge in the areas related to the objectives of the MFA-I operation (i.e. macroeconomic 
and fiscal policy, structural reforms in the areas of PFM, social and labour policy, investment 
climate and trade, and energy).   

Therefore,  the  following  groups  of  stakeholders  have  been  central  in  this  consultation 
strategy: (1) Kyrgyzstan authorities; (2) International Financial Institutions, (3) Other donors, 
(4) external (i.e. non-governmental) experts.   

In  addition,  EU  officials,  including  current  and  former  representatives  of  the  European 
Commission,  representatives  of  the  European  External  Action  Service  (EEAS)  and 
representatives  of  the  EU  Delegation  in  Kyrgyzstan  played  a  key  role  in  the  information 
gathering process.  

The full list of stakeholders is detailed in Annex 4 of the external report.  

Consultation methods 

Interviews with key informants 

A  series  of  face-to-face,  in-depth  interviews  were  conducted  with  all  key  informants  and 
stakeholders,  including  non-governmental  actors  such  as  business  representatives  and  civil 
society  organisations.  The  table  below  indicates  the  number  and  types  of  stakeholders 
interviewed.  

52 

 
 
Overview of the interviews conducted: 

Stakeholder Group 

No 
interviews 

of 

Roles and responsibilities of interviewees 

European Commission 

8 

EU  Delegation 
Kyrgyz Republic 

in 

the 

EEAS 

IMF 

WB 

3 

1 

7 

2 

Kyrgyz Authorities 

12 

Non-governmental 
stakeholders  in  the  Kyrgyz 
Republic 

Bilateral donors 

Total 

6 

2 

41 

DG  ECFIN  (6)  –  those  responsible  for  design  and 
monitoring  of  MFA  operation 
the  Kyrgyz 
Republic 

in 

DG  DEVCO  (2)  –  those  responsible  for  budget 
support operations in the region 

Head  of  Cooperation  &  economic  and  political 
advisers 

Desk officer for the Kyrgyz Republic 

IMF ResRep  

Locally based economists 

Former and current Chief Missions and their team 

Person  responsible  for  the  Development  Policy 
Operation in the Kyrgyz Republic 

Economists based in Kyrgyz Republic 

Officials from the Presidential administration, Office 
of the Prime Minister, Ministry of Finance, National 
Bank and Chamber of Accounts 

Representatives  of  businesses  (2),  civil  society 
organisations (3), a local think tank (1) 

Representatives  from 
embassies  

the  German  and  French 

The  focus  of  the  interviews  varied  significantly  depending  on  the  stakeholder  type.  The 
interviews were used to analyse all evaluation questions - relevance, effectiveness, efficiency, 
coherence,  EU  added  value.  The  topics  covered  included,  among  others,  design  and 
coordination of the MFA programmes, assessment of the economic impact of the MFA, views 
on progresses made in various reform areas and role of MFA in achieving these, articulation 
of  the  MFA  with  other  EU  instruments/as  part  of  the  wider  EU-Kyrgyzstan  relationships, 
implementation  aspects  such  as  domestic  political  and  institutional  constraints  as  well  as 
timeliness of disbursements). The insight gained through the interviews was a key input for 
the assessment of the five evaluation questions.  

The key findings from the interview discussions are detailed in Annex 7.  

53 

 
 
 
 
 
 
 
 
Focus group 

The  focus  group  discussion  was  organised  with  a  wider  group  of  non-government 
stakeholders  (not  directly  involved  in  the  operations)  to  collect  their  views  and  opinions  on 
various  aspects  of  the  MFA  operation.  Representatives  of  the  following  organisations 
participated in the focus group discussion: 

  Eurasian Development Bank; 
  World Bank; 
  Asian Development Bank; 
  United Nations Development Programme - Kyrgyzstan; 
  Deutsche Gesellschaft für Internationale Zusammenarbeit - Kyrgyzstan;  
  European Bank for Reconstruction and Development. 

The full list of participants is detailed in Annex 4 of the external report.  

The  findings  from  this  exercise  were  therefore  used  to  complement  as  well  as  cross-check 
information collected from other sources such as desk research and key informant interviews. 
The key findings from these discussions are detailed in Annex 3.  

Workshop  

The stakeholder validation workshop was organised in January 2019 via video-conference 
from Brussels in order to validate the emerging findings with stakeholders closely. The 
specific agenda comprised a presentation of the main findings by the external consultant, 
followed by a discussion. Potential recommendations as regards the design and 
implementation of future MFA operations were also discussed.  

The full list of participants is detailed in Annex 12 of the external report.  

54 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annex 7: Summary of findings from stakeholder consultation activities 

Interviews with EU and Kyrgyz stakeholders 

Relevance of the EU MFA 

There was general consensus among the stakeholders consulted that the EU MFA was sizable, 
though  to  a  lesser  extent  when  compared  to  other  forms  of  EU  and  international  assistance 
provided  to  the  Kyrgyz  Republic  (e.g.  IMF  support).  Most  stakeholders  recalled  the  delays 
that  surrounded  the  design  and  implementation  process,  which  had  some  bearing  on  EU-
Kyrgyz relations owing to the uncertainty that prevailed as regards the actual disbursement of 
the MFA. Eventually, the disbursement of the MFA was however coincidentally timely owing 
to new economic difficulties the Kyrgyz economy faced from 2015 (i.e. a sharp fall in exports 
to Russia (2015) and an important contraction in gold production (2016)). On the form of the 
MFA  (i.e.  the  grant-loan  combination),  this  was  considered  appropriate  by  both  EU  and 
Kyrgyz  stakeholders.  Some  Kyrgyz  stakeholders  did  however  highlight  their  preference  for 
grant-only  arrangements.  Various  EU  stakeholders  commented  on  this  possibility  and 
confirmed  that  the  likelihood  for  such  an  arrangement  was  low  at  the  time,  given  the 
(existing) realm of EU aid operations in place in Kyrgyzstan.  

The  EU  MFA  was  accompanied  by  a  reform  package  agreed  between  the  EU  and  Kyrgyz 
authorities.  Target  reform  areas  were  informed  by  an  in-depth  operational  assessment 
conducted by the EU that highlighted priority areas for action. EU and Kyrgyz stakeholders 
unanimously  agreed  that  the  MFA  reform  package  was  in  line  with  the priorities  set  by  the 
Kyrgyz government as well as other donors / IFIs (as part of their support programmes). The 
reforms  were  also  consistent  with  wider  objectives  associated  with  EU  MFA  operations, 
notably  to  promote  structural  measures/reforms  capable  of  driving  and  maintaining 
macroeconomic stability. However, owing to various procedural delays, most of the reforms 
had been implemented by the time the MoU was agreed and signed. Various stakeholders felt 
that the fulfilment of MFA conditionalities prior to the signature of the MoU  de facto made 
the  conditionalities  redundant,  wrongly  signalling  to  Kyrgyz  authorities  that  the  EU  was 
handing ‘free’ money. There was thus strong support for re-negotiations.  

Effectiveness of the EU MFA 

Stakeholders  were  asked  about  various  aspects  (pertaining  to  the  effectiveness)  of  the  EU 
MFA  package,  notably:  the  nature  and  extent  of  reform  implementation  and  the  (economic 
and social) impacts of such reforms.  

Some stakeholders remarked that, in spite of the delays encountered in finalising the terms of 
the  MFA  package  and  disbursing  the  assistance  to  the  Kyrgyz  Republic,  the  EU  MFA 
coincidentally  came  at  the  right  moment  (i.e.  2015).  The  Kyrgyz  economy  was  facing  new 
economic  difficulties,  while  parliamentary  elections  were  nearing.  Nonetheless,  it  was 
generally  recognised  that  the  EU  MFA  was  not  “indispensable”  and  that  the  Kyrgyz 
government would have been able to find/seek alternative sources of finance in these difficult 
times  (e.g.  Russian  support).  In  addition,  many  stakeholders  believed  that  the  Kyrgyz 
government  would  have  also  resorted  to  cutting  public  expenditure  (especially  among 
unprotected categories).  

It  was  generally  recognised  that  target  reform  areas  under  the  EU  MFA  were  appropriate. 
However,  other  donors  (notably  the  IMF  and  the  WB)  were  also  active  in  these  areas  and 

55 

 
 
 
promoted  longer-term  reforms  (with  potentially  more  significant  macro-economic  impacts 
than  the  EU  MFA).  Most  stakeholders  confirmed  that  Kyrgyz  authorities  fulfilled  the 
economic  and  structural  policy  conditions  related  to  the  disbursement  of  the  MFA  in  a 
satisfactory way. Various stakeholders however questioned the potential redundancy of MFA 
conditions,  given  that  most  of  the  reforms  had  been  implemented  prior  to  the  MoU  being 
approved. There was general preference for re-negotiations to ensure that reforms were still fit 
for purpose at the time of the disbursements. Some stakeholders praised the IMF’s negotiation 
process, which (as opposed to the EU) offers greater flexibility to review and adjust reforms / 
conditions.  

It was generally recognised that the EU MFA  entailed additional impacts. First,  its political 
dimension  contributed  to  strengthening  EU-Kyrgyz  relations  at  a  time  when  the  Kyrgyz 
Republic  faced  important  political  and  economic  difficulties.  This  impact  was  however 
potentially  reduced  owing  to  the  delays  that  surrounded  the  disbursement  of  the  EU  MFA. 
Additionally,  the  magnitude  of  the  impacts  entailed  by  the  EU  MFA  may  have  been  less 
important when compared to other EU programmes. These are known to have had a desired 
positive impact, notably in terms of advancing legislation and promoting certain values, such 
as democracy, free press, rule of law and good governance. 

Furthermore,  a  number  of  stakeholders  recognised  that,  even  though  the  EU  MFA  did  not 
explicitly target particular areas of social development, it played an important role alongside 
other stakeholders (notably civil society) in preventing the enactment of the ‘foreign agents’ 
and ‘anti-LGBTI’ bills in 2015 and 2016.  

Efficiency of the EU MFA 

In general, stakeholders consulted during this research acknowledged a smooth running of the 
negotiation process (facilitated through various mission visits). This also comprised effective 
coordination  between  the  EU  and  other  international  donors  to  ensure  that  actions/reforms 
under the EU MFA complemented those promoted by other donors on the ground. There were 
particular  synergies  in  the  public  financial  management  (PFM)  and  financial  areas.  The 
general level of reform ownership among Kyrgyz authorities was seen by many stakeholders 
as  having  been  varying,  partly  in  sync  with  the  pendulum  of  the  political  cycle.  Although 
some stakeholders saw a substantial pick up in the appetite to embark on MFA reforms in late 
2014, more difficulties were reported closer to the parliamentary elections in the late 2015. In 
terms of monitoring, formal and regular missions constituted an important channel of dialogue 
between  the  Commission  and  Kyrgyz  authorities.  These  were  generally  led  by  the 
Commission  in  close  collaboration  with  the  EU  Delegation  to  the  Kyrgyz  Republic.  The 
monitoring  process  was  judged  appropriate,  though  less  stringent  when  compared  to  the 
extent  of  supervision  undertaken  in  other  recipient  countries.  A  commonly-cited  reason  for 
reduced scrutiny in the case of Kyrgyzstan was that it was “outside of the traditional scope of 
MFA.” 

EU added value of the EU MFA 

There was general recognition that the EU’s added value, as a result of the MFA, was high at 
the beginning of the negotiation/implementation process. However, with the numerous delays, 
it was further recognised that the overall EU added value was arguably reduced. In particular, 
various  stakeholders  felt  that  these  delays  had  adversely  impacted  the  extent  of  awareness / 
visibility surrounding the operation. 

Coherence of the EU MFA 

56 

 
 
It  was  generally  recognised  that  the  MFA  conditionalities  /  reforms  were  designed  to  be 
coherent  with  the  objectives  of  the  operation  as  well  as  other  EU  and  international  donor 
support programmes, notably in the PFM and banking areas. As such, the MFA operation was 
both, internally as well as externally coherent. 

Focus group with development partners 

Theme  1:  Awareness  of  the  role  played  by  the  EU  support  and  specifically  the  MFA 
operation 

Familiarity with the MFA operation 

The general consensus among the workshop participants was that “publicity” surrounding the 
EU MFA has  been  negligible in  Kyrgyzstan. There is  little awareness/understanding among 
the donor community (and the general population) of the MFA instrument, its objectives and 
intended outcomes.  

Several participants (e.g. GIZ, EBRD) explained that the EU MFA is only viewed as “some 
form of EU support.” The EU MFA is not necessarily attributed to budget support. Specific 
conditions attached to the operation are also not widely known and information is lacking as 
regards the concrete outcomes/impacts the operation is seeking to achieve. 

Other  participants  also  stressed  that  awareness  of  the  MFA  operation  is  almost  inexistent 
among the general population (in Bishkek as well as other provinces, such as Osh).  

Extent of media coverage 

The  EU  is  generally  perceived  as  an  important  donor  partner  in  Kyrgyzstan.  However,  the 
MFA operation has received less attention (by the media) when compared to other EU support 
programmes,  especially  those  dedicated  to  reforms  in  the  areas  of  the  rule  of  law,  the 
judiciary, the electoral system.  

A representative of the UNDP explained that the international donors’ conference (organised 
in Bishkek back in July 2010) promulgated the EU’s work in / assistance to Kyrgyzstan, but 
little was said about the MFA operation specifically This was because the MFA negotiations 
had  not  yet  been  initiated  around  the  time  the  conference  took  place.  In  contrast,  the  focus 
was  on  the  EU’s  continued  assistance  to  Kyrgyzstan  to  tackle  important  societal 
issues/challenges (e.g. deficiencies of the electoral system).  

In the same vein, representatives from the EBRD acknowledged the need to publicise the role 
of the EU more widely. Various initiatives of the EBRD are often co-managed by the EU and, 
in  these  instances,  the  role  of  the  EU  becomes  more  apparent  –  e.g.  via  press  releases, 
EBRD/EU  logo  displays,  etc.  However,  in  the  case  of  the  EU  MFA,  media  coverage  is 
lacking, and other communication channels are not fully exploited.  

Various  participants  were  in  favour  of  social  media  as  a  means  to  showcase  EU  initiatives 
(such  as  the  EU  MFA),  increase  visibility,  and  stimulate  interest.  Other  communication 
channels, such as local radio, television, were also suggested to increase visibility and reach.   

General perceptions of the EU and relative visibility of its assistance programmes compared 
to those offered by other international donor organisations  

Visibility of the EU MFA could be significantly improved. As the negotiations surrounding 
the  terms/conditions  of  the  MFA  financing  often  take  place  between  the  EU  and  senior 

57 

 
 
officials of the government only, the donor community, local stakeholders (e.g. the media, the 
civil  society)  and  the  general  public  do  not  have  all  the  necessary  information  to  fully 
understand  the  purpose  and  intended  objectives  of  the  EU  MFA.  Additionally,  participants 
recognised that, in the case of the EU MFA, the outcomes/impacts/benefits are not “tangible” 
per se. As a result, further down the line, it becomes even more difficult to attribute certain 
reforms/impacts to the MFA operation.   

In  that  respect,  a  representative  of  GIZ  warned  that  the  general  public  tends  to  attribute 
specific  projects/reforms  to  the  organisations  who  ultimately  implement  them.  For  instance, 
GIZ (as opposed to Germany) is generally perceived to be the provider of financing within the 
projects it oversees on the ground.  

Some participants also indicated that the extent of the role played by donor organisations in 
implementing  certain  projects/reforms  on  the  ground  is  often  “minimised.”    As  such,  the 
opening  of  a  project  overseen  by  GIZ  was  highly-politicised  in  the  run  up  to  last  year’s 
elections, which suggests that donors often allow their projects to be used by for the purposes 
of domestic politics.  

In  terms  of  visibility, the  EU  MFA  operation  is  not  on  par with  other  support  programmes, 
notably  the  IMF’s.  The  IMF  has  a  longstanding  relationship  with  Kyrgyzstan,  which  could 
nonetheless  explain  the  relative  importance  attributed  to  its  programmes  (and  associated 
conditionalities / reform areas) among the media, and local stakeholders, including the general 
public.  

Raising  awareness  is  thus  imperative  when  it  comes  to  the  EU  MFA.  As  alluded  to  before, 
communication channels (specifically digital media) ought to be fully exploited. Participants 
also suggested that the process of negotiating and agreeing the terms of the MFA financing be 
publicised.  Ratification  of  the  MFA  agreement  by  Parliament,  for  instance,  could  be  more 
widely covered. This would not only increase awareness of the operation but also the level of 
transparency  around  the  amount  of  funds  being  negotiated  with  the  EU  and  their  intended 
use(s). 

Theme 2: Review of the impacts of the MFA 

Economic impact 

Participants  were  asked  to  assess  the  most  probable  course  of  action  for  Kyrgyzstan  under 
various scenarios, namely: (i) Alternative 1: what would have happened had MFA not been 
disbursed in 2015 and 2016? (ii) Alternative 2: what would have happened had MFA and IMF 
assistance not been disbursed in 2015 and 2016?   

Under Alternative 1, several scenarios were discussed, including:  

Scenario 1: Financing from other key donor / bilateral partners; 

Scenario 2: Financing from domestic markets; 

Scenario 3: Public cuts. 

Scenario  1  was  generally  seen  as  the  preferred  course  of  action  for  Kyrgyzstan  had  MFA 
assistance not been provided. According to participants, Russia would have been the “easiest” 
partner  to reach out to  for  budget support. The extent to  which the financing offered would 
have  been  “tied”  (i.e.  specific  conditions  would  be  established  prior  to  disbursement)  was 
however  difficult  to  ascertain.  As  such,  Russia  currently  provides  many  (varying)  forms  of 

58 

 
 
assistance  to  Kyrgyzstan  and  the  extent  to  which  their  disbursement  is  conditional  on  the 
implementation of reform is not known.    

Scenario  2  could  potentially  have  been  contemplated  by  the  Kyrgyz  government,  though  it 
could have proved more expensive (as opposed to seeking grant support from donor/bilateral 
partners)  and  further  exacerbated  the  crisis  faced  by  the  country.  In  that  regard,  some 
participants  recalled  Armenia’s  experience.    In  2010,  the  Armenian  government  engaged  in 
large-scale borrowing from domestic markets to finance public spending and boost economic 
activity. This led to a rapid and substantial increase in interest rates and the “crowding out” of 
private  investment  (or  a  reduction  in  private  investment  spending).  The  government 
eventually had to adjust the fiscal rule to contain the pressures caused by their overspend, but 
with difficulty. 

Scenario  3  was  considered  plausible,  though  it  was  generally  agreed  that  the  government’s 
room  for  manoeuvre  would  most  likely  have  been  small.  As  such,  some  government 
expenditures are “protected” and there would not have been much flexibility to reduce them. 
On the other hand, a reduction in or (most likely) a reallocation of capital expenditures could 
have  been  considered.  In  sum,  the  government  would  have  most  probably  favoured  greater 
budget / fiscal discipline.  

In  the event that  both IMF and EU assistance would not  have  been  provided  to Kyrgyzstan 
(Alternative 2), participants generally agreed that bilateral partners, such as Russia and China, 
would  have  most  likely  played  a  greater  role  (as  regards  the  provision  of  financing).  In 
addition, a representative of the Eurasian Development Bank (EDB) reckoned that the Kyrgyz 
government  could  have  issued  Eurobonds,  i.e.  It  could  have  resorted  to  more  non-
concessional borrowing. This approach was recently trialled by the Tajik government.  

Political impact 

On  the  political  significance  of  the  EU  MFA  in  Kyrgyzstan,  a  prevalent  observation  from 
participants  was  that  the  operation  did  not  “catch  eyes  and  ears.”  This  also  applies  to  the 
delays experienced during the negotiations and disbursements which, equally, did not receive 
much attention at national level.  

The  lack  of  visibility  around  the  EU  MFA  was,  to  some  extent,  attributed  to  the  EU’s 
insufficient  presence  on  the  ground  (as  opposed  to  countries,  such  as  Russia,  which  invest 
considerably in Kyrgyzstan and heavily publicise their support programmes).  

Nonetheless,  participants  remarked  that  other  EU  programmes,  notably  those  targeted  at 
specific reforms (e.g. electoral system, rule of law, democracy, etc.), tend to be more widely 
covered  and  have  sparked  greater  interest  over  the  years  among  local  stakeholders  and  the 
general  public.  It  is  easier  to  promote  such  programmes/projects  as  the  objectives/intended 
outcomes  of  the  assistance  offered  are  clearer  and  “more  targeted.”  On  the  contrary, 
conditions associated with  the EU MFA are often “too technical” and difficult to convey  to 
“laymen.”  

To  further  boost  visibility,  participants  suggested  that  the  EU  increase  support  designed  to 
tackle important (and pressing) societal issues, such as bridal kidnapping, gender inequality, 
promotion of women’s rights, and promotion of mass media. 

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Theme 3: Review of the MFA contribution to Kyrgyz reform efforts 

General assessment 

Mass  media  and  civil  society  were  viewed  as  critical  in  driving  national  reforms  in 
Kyrgyzstan. Specifically, they can help better promote donor assistance at national, local, and 
regional level. When assisting the implementation of reforms in the country, donors (such as 
the  EU)  ought  to  engage  more  heavily  with  them  to  boost  visibility  of  their  support 
programmes.  

As far as  the  EU MFA is  concerned, participants  suggested that conditions be developed in 
collaboration/consultation  with  civil  society  and  other  lobby  groups.  Additionally,  the 
language  used  for  describing  the  conditions  ought  to  be  simplified  in  order  to  reach  out  / 
appeal  to  a  larger  audience.  These  conditions  should  also  be  publicised  and  made  available 
within the public domain. This would increase transparency around how the EU MFA is being 
channelled into public sector reform. 

On the design of external support/assistance, participants were generally in favour of the idea 
of having conditionalities attached to financing (akin to the EU MFA). In a way, they ensure 
that “government is accountable” and “pressured into reforming priority areas.”  

Participants highlighted Kyrgyzstan’s longstanding track record of successfully implementing 
reforms (when compared to its neighbours). However, in 2010, the Constitution was amended 
and required that reforms be ratified in Parliament, which largely reduced the government’s 
ability/power  to  “move  reforms  quickly  in  the  short  term.”  Additionally,  some  participants 
remarked  that  “frequent  changes  in  government”  (as  experienced  by  Kyrgyzstan  in  recent 
years) tend to limit policy / reform continuity. Further, corruption is rampant and,  to a large 
extent,  inhibits  reform.  Corruption  scandals  were  particularly  cited  in  the  judiciary  which, 
according to participants, have furthered the level of distrust towards the courts. 

Participants  were  asked  about  potential  reform  areas  for  the  EU  to  focus  on  going  forward. 
The  judiciary,  public  governance  (or  corruption),  and  private  sector  development  (including 
competitiveness) were most commonly cited.  Other key reform areas identified were: trade 
and banking. As regards the former, one participant explained that Kyrgyzstan’s membership 
to  the  Eurasian  Economic  Union  (EEU)  has  not  reaped  the  benefits  intended.  Many  trade 
barriers still exist. As regards the latter, access to loans (especially by businesses) was flagged 
as  a  major  concern,  a  key  impediment  being  high  interest  rates.  Finally,  policies/reforms 
aimed at furthering digital transformation were also recommended. Digital transformation of 
the  economy  has  the  capacity  to  spur  innovation  and  boost  more  sustainable  growth. 
Participants  warned  that  Kyrgyzstan  should  not  lag  behind  its  neighbours  in  this  area  but 
instead  channel  efforts  into  positioning  itself  as  a  “regional  digital  hub”  or  “digital 
champion.”  

Finally, participants suggested that the EU focus on social reforms as well, notably women’s 
healthcare  services,  which  were  reported  to  be  lacking  in  many  parts  of  the  country.  More 
widely,  the  needs  of  vulnerable  groups  (such  as  children,  the  elderly,  etc.)  should  be 
thoroughly assessed and reforms should be focused on improving their well-being. 

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